One could easily be forgiven for assuming that the Mumbai Port Trust (MbPT), which owns around 728 hecatres of land in the heart of Mumbai, is the richest landlord in the city. The truth is that the port trust that owns the largest bank of commercially exploitable land — worth thousands of crores — in the country’s financial capital, earns a paltry sum of R150 crore by way of rent annually.
Pockets within the land bank that MbPT owns, like Ballard Estate, are home to the headquarters of several big Indian corporations, including private sector companies such as Larsen and Toubro and the Anil Ambani-led Reliance Group. Ballard Estate has a built-up area of about 2 million sq ft. The average rent that this locality (measuring around 40 hectares) commands is R160-170 per sq ft per month. By this calculation, the MbPT should earn more than double of what it does from its entire land holding, from Ballard Estate alone.
FE couldn’t ascertain the exact value of MbPT’s land holding and the rental opportunity thereof.
The biggest challenge facing MbPT is several of its old tenants are paying rents pegged to old benchmarks and have moved for litigation whenever it has tried to revise the rent to reflect the present day value of its real estate. Among the other challenges that MbPT faces with respect to its tenants are several breaches of the lease agreements, including refusal to vacate the premises upon expiry of the lease durations, illegal encroachments, and sub-letting by the tenants without the port trust’s knowledge.
The most recent high-profile case of a tussle over rent payment between MbPT and one of its tenants is that with the Tata Group’s Indian Hotels, which runs the iconic Taj Mahal Palace and Towers hotel on the Colaba seafront. The matter is pending in the Bombay High Court.
The Taj Mahal hotel stands on a 4057.92 sq metres plot and the hospitality company pays an annual rent of R1 crore for the same. The 99-year lease came to an end in 1999-2001 and has not been renewed since. In 2012, MbPT sent an eviction notice to the hotel, but the latter moved the high court in February 2013 seeking renewal of the lease.
“As the matter is now sub-judice, we are not in a position to comment further,” a Taj spokesperson said in response to an email.
Having learnt from the past, MbPT chairman Ravi Parmar told FE that, in the future, it will not renew lease agreements that do not have a rental renewal clause. “Wherever there is no renewal clause we are not renewing the leases and we are filing cases against them under Public Premises Act,” Parmar said in an interview with FE.
Out of the 728 hecatres that MbPT owns on the coastline between Colaba in the south and Wadala in the east, around 275 hectares have been developed to house commercial, industrial and residential establishments. MbPT has around 2,500 tenants.
The rent collected by the port trust from its tenants were set initially in 1957-58 and were reviewed in 1981 as per the recommendations of the Kirloskar Committee.
However, the revised rent was never implemented as some of the lessees moved court challenging the revision.
The matter was finally settled by the Supreme Court in 2004, which approved a formula for revised rent payment. However, Parmar says that even that could not been implemented due to non-cooperation by tenants. Raising rents is a challenge because tenants approach the court and the cases go on for several years without a resolution to the matter, he said.
Like with the Tata Group’s Indian Hotels, MbPT is battling similar court cases with its other tenants, including Hindustan Unilever, Western India Oil Company and elite clubs like the Bombay Yatch Club and the Radio Club.
A HUL spokesperson said in an email that the company had petitioned the court in lieu of the “arbitrary increase in lease rental”effected by MbPT, and that the case was pending before the Bombay High Court.
HUL has leased two properties from the port trust – in Haji Bunder and Hay Bunder in Sewri, along Mumbai’s eastern coastline. The properties are used as research and development centres and warehousing units by the company.
The MbPT has also been on a drive to recover rent from defaulting tenants, but the amount it has collected so far is miniscule compared to what is owed to it, according to Parmar. “We have got 70 hectares of land vacated in the last 10 years and recovered R600 crore of the R1,000 crore demand notices sent. But this is based on old rates,” Parmar said. He refused to put a number to the loss of revenue to the port trust on account of tenants defaulting on rent payment, but said that the number would run into thousands of crores.
According to Parmar, while the earlier rent revisions are yet to be implemented, it was already time to revise lease rentals with retrospective effect from October 1, 2012. “We will revise them shortly and if they get implemented, we will earn a good sum through rent, but still way below the market rate,” he said.
Total land owned by MbPT 728 hectares
Total developed land leased out 275 hectares
Number of tenants (residential and commercial) 2,500
Rental income per year: R150 crore