Mumbai: In what is probably a first in the country, City and Industrial Development Corporation of Maharashtra (Cidco), the special planning authority for the Navi Mumbai area, will initiate the so-called book-building process to sell its luxury development at Seawoods phase II in Navi Mumbai.
Book building has been typically used during initial public offerings (IPOs) as a way to figure out the most efficient price. Bids are collected during the IPO period at various prices between the floor price and the price cap. The final issue price is determined based on the price that receives maximum investor support.
Cidco’s book-building process will apply to 189 flats out of the 225 flats it is building at Seawoods with bidding opening on 26 December and running through 11 January.
The other 63 flats have been kept aside for scheduled castes, scheduled tribes and other reserved categoriesand will be sold at the price discovered in the book-building process.
“Using a book-building process will help us to discover a fair price in a transparent manner. As a government organization, we are concerned that what we sell should not be overpriced or underpriced,” said Cidco’s managing director G.S. Gill.
“The investor can be assured that he is paying a price which is market-determined,” added Nakul Patil, chairman, Cidco.
The price band for Cidco’s 189 flats has been set at Rs5,200-7,500 sq. ft with prices going up by Rs50 per sq. ft for every floor after the fourth floor and Rs75 per sq. ft after the 10th floor.
Gill explained that the cut-off price would be determined based on the price that gets the maximum bids. The final price of the flat will include the premium per floor plus the cut-off price arrived at through the bidding process.
For instance, if the cut-off price is Rs5,200 a per sq. ft and the flat one wishes to buy is on the ninth floor, the per sq. ft price would work out to Rs5,650 per sq. ft.
Sunil Bajaj, an independent real estate consultant, said current prices in a 2kmradius of the Seawoods complex are in the range ofRs4,000-7,000 per sq. ft,depending on the quality of construction. Manohar Shroff, a real estate agent who works in the area, said prices within the Seawoods complex itself are in the range of Rs5,000-6,000.
He added that demand for flats in the area is rising because of the new international airport that is being built in nearby Panvel.
Cidco had last sold flats in the complex at Rs1,700 persq. ft in 2002, before real estate prices began to rally around 2004.
The upper income category houses in the complex range in area from 1,230 sq.ft for a two-bedroom flat to 4,872 sq. ft for a penthouse.
Cidco had sold 1,534 apartments in phase I of theSeawoods project, which is spread over 14.5 ha. The current phase is spread over 11ha and has been designed by architect Hafeez Contractor.
“Many developers do a kind of book-building activity informally before launching a project but I have not heard of any developer selling his properties through a formal book-building process,” saidAkshay Kumar, former head of property services provider Collliers India.