Although an agreement to jointly develop the land had been signed between the two, the deal could not be closed since Jet Airways was awaiting a permission from the Mumbai Metropolitan Regional Development Authority (MMRDA), responsible for planning and development of the metropolitan area of Mumbai city, for an additional floor space index (FSI) for the project. The MMRDA has now decided to give it an FSI of 6, up from the current 4, which will give the developers extra saleable space. FSI is the ratio of the total floor area of buildings in a certain location to the size of the land of that location.
Rajhans Singh, a member of the board with MMRDA, said, The MMRDA board has taken a decision to allow Jet increase the FSI of its plot which will be communicated to the airline soon. However, M Shivkumar, senior vice-president (finance) at Jet told FE that the airline has not yet received a permission letter from the MMRDA, adding that the airline is hopeful to receive the letter soon. It will then hand over the development rights to GPL formally.
A GPL spokesperson said, We will make an announcement as and when the deal happens. We don't have anything to say at present.
Jet had originally bought the plot in 2006 for Rs 399 crore from the MMRDA and had plans to shift its headquarters there, from the existing SM centre at Andheri, in order to save at least Rs 12 crore towards annual lease rentals.
However, the global economic slowdown made it change its plans, and it roped in Godrej Properties as a joint developer. KG Vishwanath, vice-president (commercial strategy and investor relations), Jet Airways, in the analyst call earlier, had said Jet has already signed a land development agreement deal with GPL to develop the land. GPL is reported to have bought the development rights from Jet for Rs 500 crore. The money will help Jet pay off the Rs 400 crore it borrowed from HDFC Bank to buy the land from the MMRDA. As on December 31, 2010, Jet had a debt of Rs 13,000 crore on its books.
Once Jet gets an official approval from the MMRDA for an additional FSI, both companies can jointly develop a commercial building as high as 70 metres with around six lakh sq feet office space, which can be leased. Currently, property costs at BKC stands at around Rs 35,000 per square feet, and rentals, Rs 300 per sq ft per month. Both companies will also share revenues once the property is developed. Godrej will also invest to buy additional FSI to build saleable office space. Both Jet and GPL are listed companies. Share of Jet were down nearly 1% on the BSE to close at Rs 483.80 on Thursday, while GPL shares were down 1.5% to close at Rs 679.