Bangalore: The Bangalore Metro, which completed a year on Friday, hasn’t found too many takers for the two properties that it’s seeking to lease to bidders, even as the value of the land along the line has risen.
“On SV Road, there was only one bidder. In the Baiyappanahalli road property, there were two bidders. The bids are under analysis,” said N. Sivasailam, managing director of the Karnataka state-run Bangalore Metro Rail Corp. Ltd (BMRCL). The company is tasked with building and operating the Bangalore Metro.
BMRCL is proposing a mixed-use real estate development on 10.52 acres of land near Baiyappanahalli. The BMRCL website lists the minimum development obligations as a three-star hotel and retail space, apart from other offerings.
Sivasailam declined to name the bidders, saying it would be unfair to do so, particularly with the financial bids still being examined.
The fact that there have been few bidders “need not be necessarily reflective of the state of the economy”, said U. Vasanth Rao, a general manager at BMRCL.
The number may also be low because of the conditions that BMRCL has imposed on bidders, he said, without elaborating. The development involves land that’s integrated with the Metro, which is a first for India, Rao said. It may take 15-20 days for a decision on the bidding to be announced, he said.
The Karnataka government has allowed for an increase in permissible building limits for properties within 500m of the Metro line. Nearly two-thirds of the money that accrues from this additional provision will be given to BMRCL and the rest will be apportioned among various stakeholders such as the city corporation and power and water utilities.
The winning bid will be decided on the revenue-share level offered. From the 10th year, the revenue share quoted by the winning bidder will increase by increments of 2.5 percentage points every five years. The concession period is for 40 years.
There’s too much government involvement in the exercise, said Preenand Premchandran, chief executive officer of Hebron Properties, which is building a 75-unit villa right now.
“We expected the Metro to be without any of this red tape,” he said. “We expected minimum 10-15 bids. Now what’s happening is that there are two bids, or one person bids. The issue is that the market does not have that kind of money flow happening, especially in construction.”
The appreciation of land value has taken place in two stages, said Premachandran. The first took place when the Metro was announced and the second at the time of building.
The sparse bidding for the two properties was “very surprising,” said Goutam Chakraborty, director, integrated services, for property advisory Colliers International.
Chakraborty said he was not aware of any conditions governing the sale that could affect the number of bidders but the area around Baiyappanahalli was “one of the prime locations, and just one or two bidders is unthinkable”.
“There is no doubt about the prime (nature) of the location for commercial as well as residential development,” he said. “There is a huge catchment (area) in Indiranagar. Not finding the proper bidders is very surprising.”
The Bangalore Metro is considering an operations and management public private partnership model for two upcoming lines, Sivasailam said.