The Hindu : Business : Mumbai NTC mill land sold for Rs. 700 cr.

Online edition of India's National Newspaper
Wednesday, Jun 22, 2005

Business

Business

Mumbai NTC mill land sold for Rs. 700 cr.

Staff Correspondent

Bids for other NTC mills will open next month

— Photo: Shashi Ashiwal

`A ONE-OFF SALE': A view of the 17.5 acre Mumbai Textile Mills property which was sold for over Rs. 700 crore. The mill was owned by National Textile Corporation and the buyer was Jawala Real Estate Developers, a subsidiary of the Delhi-Based DLF Group.

MUMBAI: In what can be considered the mother of all property transactions, one of the largest pieces of real estate in Mumbai, the Mumbai Textile Mills, belonging to the National Textile Corporation, saw the highest successful bid of Rs. 702.2 crore by the Delhi-based DLF group. The enormity of this bid can be gauged from the fact that the second highest bid was made by Dosti Developers at Rs. 621 crore. The bids opened on Monday.

The DLF group bid through a special purpose vehicle (SPV), `Jawala' for the 17-acre plot measuring 9.4 lakh sq. ft, effectively working out to Rs. 7,500 per sq. ft. Simultaneously, another NTC mills land, Apollo Mills, was acquired by Lodha group of developers for Rs. 180 crore.

Earlier, in March this year, Jupiter Mills was sold for Rs. 276 crore to India Bulls Property at an effective rate of Rs. 4,200 per sq. ft. In effect, since that transaction, property prices have grown by 75 per cent.

Mofatraj Munoth, Chairman, Kalpataru group, and President, Maharashtra Chamber of Housing Industry (MCHI), told The Hindu that the Mumbai Textile Mills sale was "a one-off sale and has no parallel." He said that for DLF, whose earlier bids had been unsuccessful, "this was effectively the last chance for them to get a foothold in Mumbai.'' The real estate market, Mr. Munoth said, "is a reflection of all the other markets and is currently mirroring the buoyancy". "Real estate prices are strong and seem to be sustainable," he added.

This deal could certainly destabilise the real estate market in Mumbai, felt Pranay Vakil, Chairman, Knight Frank-India, a leading property consultancy. "Till yesterday, one could buy an office space in the same area by negotiating down from Rs. 7,000 per sq. ft with a reasonably good parking space. The effective rate in the Mumbai Mills transaction is around Rs. 8,000 per sq. ft, that is, Rs. 7,500 plus stamp duty etc. Add to this, construction costs of Rs. 1,500-2,000 per sq. ft depending on the type of construction and an important element — interest."

Further, Mr. Vakil said there had been a `carpeting' of rates between the Central Business Districts (CBDs) in Mumbai like Nariman Point, Parel and Bandra-Kurla complex. "Now these rates are identical even though globally, there is always one prime CBD with higher rates and the rest being secondary CBDs. One wonders what will happen when the additional stock hits the market over the next few years. The market will cope with rates at Rs. 6,000 or even Rs. 8,000 but why at Rs. 11,000?

Mr. Vakil and others interested in the property market in Mumbai are now waiting anxiously for the end of July when bids will be opened for other NTC Mills as well as Kohinoor Mills.

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