Mumbai: Real estate developer Piramal Realty Ltd, owned by Piramal Healthcare Ltd chairman Ajay Piramal, and Mumbai-based Sunteck Realty Ltd are close to signing a deal to buy Mafatlal Industries Ltd’s seven-acre plot in central Mumbai for around Rs 750 crore, three people familiar with the development said. One of them is directly involved with the transaction.
“They have shaken hands and the due diligence is on,” said one of them.
Real estate consultant Jones Lang LaSalle India is the exclusive adviser to the deal.
“We’re not the only one and we have a partner who is leading it... The deal is as good as Piramal’s,” said a Sunteck official, who declined to be named as the deal is not yet closed.
Sunteck’s spokesperson declined to comment. Mafatlal Industries couldn’t be reached for comment.
“We look at a lot of deals and it will be speculative to comment on it until it is closed,” a senior Piramal Realty official said.
Piramal and Sunteck also have a joint venture called Piramal Sunteck Realty Pvt. Ltd, which focuses on high-end realty projects in the most sought-after locations in metros, select tier II cities in India and strategic locations across the globe.
Mafatlal Industries, the flagship firm of the Arvind Mafatlal Group, now an apparel maker, leased the land for 99 years from the state government in 1913 to build a textile mill. But cyclical slowdowns in the textile sector and competition from new firms forced Mafatlal Industries in 2000 to be referred to the Board for Industrial and Financial Reconstruction (BIFR), an agency that helps revive sick firms.
The land in Byculla in central Mumbai is part of the assets identified as surplus under the BIFR-sanctioned scheme.
Mafatlal Industries has been trying to sell this land for quite some time, but the plan hit a road block in 2010 due to the uncertainty surrounding rights for additional floors or extra floor space index (FSI) given to builders for building parking bays for the public. FSI is the ratio of the total floor area of buildings at a certain location to the size of the land of that location.
In the past two years, the state government and developmental agencies such as the Mumbai Metropolitan Region Development Authority doled out extra FSI to realty developers who provided for public parking bays in south and central Mumbai where real estate costs about Rs 20,000-35,000 per sq. ft or more.
In March, the state government had asked the Brihanmumbai Municipal Corporation (BMC) to reconsider giving extra FSI in return for parking bays.
Since 2009, the FSI incentive has led to the creation of parking spaces for 23,000 cars in Mumbai in lieu of 7.36 million sq. ft of additional construction rights given to builders, a BMC study said.
The cancellation of additional FSI for parking bays rerated the property prices in Mumbai.
Imran Shaikh, associate director (transaction services), KPMG India, said: “Uncertainty over the parking scheme has a direct impact on the total saleable area, thereby impacting the land price developers are willing to pay.”
The reserve price of the Mafatlal Industries land deal has been brought down to Rs 700 crore from Rs 1,110 crore, said a person whose firm had invested in Sunteck Reality.
“Residential and commercial property prices which went up too quickly in the past two years are softening,” said Anshul Jain, chief executive of DTZ International Property Advisers Pvt. Ltd, a realty consultant. “In the commercial sector, while the demand is up, there is an oversupply. As a result, the prices will be flat over the next year or so.”
Based on the audited accounts of Mafatlal Industries as on 31 May, the net worth of the company has turned positive.
The total capacity of two mills, located at Navsari (near Surat) and Nadiad (near Ahmedabad), is 85,000 metres per day, says the firm’s website.
On 13 September, the company informed the Bombay Stock Exchange that it has de-registered from BIFR. On Wednesday, it closed at Rs 201, up 0.63%, while the Sensex rose 2.25%.