The Mumbai Metropolitan Region Development Authority (MMRDA) has sent a proposal to the Maharashtra government to cancel the auction of the second plot of 1.47 acres that Jet Airways had bagged for R826 crore in March 2008 at the Bandra Kurla Complex (BKC), the upcoming office hub in Mumbai.
The authority has also asked the government to be allowed to forfeit the R10 crore amount that India?s largest private airline had paid to the authority as an earnest money deposit.
Jet in March 2008 had won the rights to develop two plots of land in BKC in an open auction from MMRDA. While in August last year Jet closed a deal with Godrej Properties (GPL) for one plot, the airline is undecided on the second plot. Jet had struck a R495-crore deal with GPL for the 2.5-acre land that the airline has in BKC. The Godrej Group?s real estate development arm plans to develop a commercial and office building of around 10 lakh square feet of saleable area on that land.
?A proposal to cancel that (1.47-acre) auction has already been sent to the state government and we have asked for the earnest amount to be forfeited as well,? a senior MMRDA official told FE. Around two years back MMRDA was also looking at re-auctioning the plot; however, as a general decision, the authority has held back all land auctions for the time being.
After getting the second plot for R826 crore and paying the earnest money, Jet was supposed to pay the remaining R816 crore to MMRDA by June 2008.
However, with the global economic slowdown hitting airline industry, the company was allowed to make payments spread over a period of time.
The official said that according to the new structure, the company was supposed to pay around R400 crore by end of September 2009, along with 14% interest on that amount. The remaining money was to be paid by September 2010. ?After repeated notices, late last year, the company again sought time time till March 2012 to make the payment, but could not,? the official said.
Meanwhile, Jet maintains that it is still evaluating options for that land parcel and has not decided to return it. ?We are still evaluating what to do with that land parcel,? said KG Vishwanath, vice-president (commercial strategy and investor relations), Jet Airways, said in response to a different query. ?At this point in time we do not intend developing the second plot,? he added. He did not elaborate on the options that the company has for the land, adding Jet is not returning the plot back to MMRDA.
The 1.47-acre plot has a potential developable area of around 2.6 lakh square feet (24,000 sq m). Upon completion of the transaction, the plot would have been leased to Jet for 80 years.
The last land auction by MMRDA was undertaken in March 2008, at a time when the overheated property market of Mumbai had begun to soften. According to reports, of the five plots that MMRDA had put under the hammer in BKC, two plots did not see bidders.
The remaining three plots, of over three acres, fetched the state authority a little over R1,300 crore during the bidding process. However, in November 2007 auctions three plots of about six acres in total at BKC fetched the authority around R2,790 crore.