First Mumbai land sale in 2 years passes muster

Developer plans to build mostly homes on the 25,000 square metre plot

(MUMBAI) Asia's third- most expensive office market, sold land for 40.5 billion rupees (S$1.2 billion) in the first successful auction in almost two years.

The Mumbai Metropolitan Region Development Authority sold the land in the central Wadala neighbourhood to Lodha Developers Ltd, the agency's Additional Commissioner SVR Srinivas said on Tuesday. The authority will lease the land for 65 years and had set a reserve price of 19.8 billion rupees or 40,000 rupees a square metre, according to the tender document.

The agency's first sale of land since 2008 gives Lodha Developers the largest development rights in the city, said managing director Abhisheck Lodha. The company can build 495,000 square metres (5.3 million square feet) of space on a 25,000 square metre area.

The authority, which failed to sell a block in the city's emerging business district earlier this year, managed to attract buyers for a separate parcel of land on Tuesday after allowing builders to construct homes and offices. Earlier rules only allowed commercial development.

'It's a fair deal and in line with current prices in the area,' Ashutosh Limaye, associate director at Jones Lang Lasalle Meghraj, said. 'At this bid price their cost including construction and financing will work out to about 15,000 rupees a square foot.' Lodha Developers, which is planning an initial share sale, will build mostly homes on the land, Mr Lodha said.

The four bidders included Sunteck Realty Ltd and Indiabulls Real Estate Ltd. Sunteck bid 70,002 rupees a square foot compared with Lodha Developers' 81,818 rupees.

'The bid price was better than we expected,' said Mumbai development authority's Mr Srinivas. The agency was optimistic of selling the Wadala plot because the area is expected to get metro and monorail connectivity, he said.

The sale comes after the authority didn't attract any bids for land at Bandra-Kurla Complex this year priced at 300,000 rupees a square metre, unchanged from 2008. Rents in the area have dropped by more than a third in two years, according to data from property broker CB Richard Ellis India.

Mumbai, a city of 18 million people, ranks behind Hong Kong and Tokyo as the most expensive office location in Asia, according to a survey by Los Angeles-based CB Richard Ellis Group Inc. -- Bloomberg

Source: Business Times, 27 May 2010