Mumbai: The auction for Kingfisher House, the headquarters of the defunct Vijay Mallya-promoted Kingfisher Airlines Ltd, failed to draw any bids on Thursday, two people familiar with the development confirmed.

A real estate adviser said the asking price was too high.

The property was being auctioned through an electronic auction process conducted by SBICAP Trustee Co. Ltd on Thursday afternoon. The base price for this multi-storey building, with a built up area of over 17,000 sq. ft,was set at 150 crore.

“Today’s market is a distressed market. Land has become unproductive and these land prices are not saleable; 17,000 sq. ft for a ready asset for 150 crore comes close to 88,000 per sq. ft on land area which is way too high and I fail to understand the calculation and logic behind how they come up to that value," said Pankaj Kapoor, managing director, Liases Foras, a real estate consultant.

According to property consultants, the average commercial property price in the Vile Parle area where Kingfisher House is located, is at around 28,000 per sq. ft.

“There were no bids and thus the auction failed. We’ll have to conduct another auction for the property now, however, it is not decided when we will do it," said a senior official at State Bank of India (SBI), speaking on condition of anonymity.

In February 2015, a consortium of 17 banks led by the country’s largest state-owned bank SBI, took possession of Kingfisher House in a bid to recover loans granted to the airline. Kingfisher has pending dues of over 9,000 crore which banks are trying to recover.

“What is the rationale behind this price? There will be no takers for this; even at half the price, there may be no takers in the current market scenario," Kapoor of Liases Foras added.

“The next step has to be rationalization of the prices. This should be a precursor for a new price setting in the market," he said.

The real estate market in India has been among the sectors worst hit by the economic downturn. Tepid home sales, rising inventory levels and weak sentiment pulled down India’s property markets in 2015, with not much hope of a recovery soon. The sector awaits the return of investors and customers, who seem to be waiting for prices to stabilize.

Last month, SBI Capital Markets Ltd (SBICap), an investment bank unit of SBI, issued a public notice saying Kingfisher House would be sold through an e-auction under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi), 2002. SBICAP Trustee Co. Ltd, a security trustee of the consortium, was managing the auction.

Kingfisher House also comes with an outstanding property tax of 67 lakh.

Kingfisher Airlines, founded by liquor baron Vijay Mallya and once India’s second-biggest airline, stopped flying in 2012 after it ran out of cash. In November, lenders called for interest in movable assets—primarily vehicles and assets related to airline businesses—from prospective buyers. They also moved to auction immovable properties such as Kingfisher House.

The lack of bidders for stressed assets points at a broader problem for the Indian banking system which is amidst a major clean up drive. Reserve Bank of India (RBI) governor, Raghuram Rajan in December had said that he expects banks to have done enough to clean their books of all stress by March 2017.

The banking regulator has asked banks to provide for and reclassify stressed assets as part of an asset quality review that took place in December. Banks were asked to make at least half the required provisions in the October-December quarter and the remaining in the fourth quarter of 2015-16 (January-March).

In a report on Wednesday, JP Morgan analysts Seshadri Sen and Dhiren Shah wrote that while aggressive recognition and reclassification of stressed loans was a positive for the banking system, inadequate bank capital and low prices quoted by stressed asset buyers could play spoilsport.

Gross non-performing assets (NPAs) of 39 listed banks surged to 4.38 trillion in the quarter ended 31 December from 3.4 trillion at the end of the September quarter, according to data collated by corporate database provider Capitaline.