Land deals in Mumbai and its suburbs have dried up as buyers, wary of legal and regulatory hurdles, refuse to pay up the money demanded by sellers, industry officials and analysts said. The demonetisation exercise and the crackdown on black money haven’t helped either.
Last month, drugmaker GlaxoSmithKline Pharmaceuticals Ltd cancelled bids to sell 64 acres in Thane for around Rs1,500 crore, two people aware of the development said. This is the second time GSK is scrapping the sale, after attempting it first in 2014. Large Mumbai builders including Oberoi Realty, Piramal Realty and Wadhwa Group were interested in the plot, but the deal, considered one of the largest in value terms in the last three years, failed as buyers, wary of pending government permissions, were not willing to pay what GSK wanted, two people involved with the development said.
One of the bidders said, on the condition of anonymity, that GSK has returned the bid deposits. The Wadhwa Group confirmed that bidding was put on hold. GSK declined to comment.
“Being a big land parcel, it had a few government permission issues including urban land ceiling (ULC) clearance, conversion from industrial to residential land and labour NOC (no-objection certificate). So, because of all the risks involved with the land, there is a big margin between final net value offered by the bidders and what was being quoted earlier,” said Vrushank Mehta, head (corporate strategy and land acquisition), Wadhwa Group.
At Bandra Kurla Complex (BKC), there won’t be any immediate land deals either. Last August, the Mumbai Metropolitan Region Development Authority (MMRDA), which is developing the financial district, cancelled the auction of a 3.08-acre commercial plot valued at around Rs1,400 crore as it could not find any takers. Developers said the plot was over-priced and given an ongoing construction ban, it was not worth the risk.
On 29 February 2016, the Bombay high court had banned all new construction in the city, citing failure of the government authorities to comply with waste management rules. “We are not going ahead with the auction as yet as there is no change in the situation. New construction is still banned by the high court,” said U.P.S. Madan, commissioner, MMRDA.
“Most of the land deals in Mumbai are stuck because of two reasons. One is the (Bombay) high court order which doesn’t allow development in Mumbai until the issue of solid waste management is resolved. Two, the Development Control Rules (DCR) are ever changing. So, for high-value deals that can make or break a company, they are unable to take a call. There is confusion over how to buy land and how to price it,” said Shobhit Agarwal, managing director (capital markets) at JLL India, a property consultant. He said because of the two issues, Mumbai has been one of the slowest in terms of land deals as compared to other major cities like Delhi and Bengaluru.
The last one year has seen several distressed land and property sales failing to take off. Aditya Birla Group firm Hindalco Industries Ltd’s plan to sell 33 acres in Kalwa near Thane for nearly Rs1,500 crore has been on hold for more than a year. Kingfisher House, the corporate office of the grounded Kingfisher Airlines Ltd, too hasn’t found any takers, despite lenders who own the structure reducing its base price by 15% from the initial Rs135 crore. Brokers and property advisers have attributed the failure to unrealistic price expectations of lenders led by State Bank of India.