No takers for two Bandra-Kurla Complex plots indicative of dip in Mumbai land prices

Mumbai: The virtual drought in the number of bidders for the Mumbai Metropolitan Region Develoment Authority auction indicates beyond doubt the erosion of valuations in the real estate sector in Mumbai.

The auction on Tuesday saw virtual absence of bidders, with only bidder wagering Rs3.44 lakh per square metre for an office plot of 24,000 square metres. There were no takers for a commercial plot of 28,000 square meters, and also for a 6,420-sq metre area for a residential clubhouse.

The MMRDA had invited bids for two commercial and two residential plots, as well as for a residential-cum-clubhouse area. The reserve price for the commercial plots and the residential-cum-clubhouse area was Rs3 lakh per square metre, and the reserve for the residential plot was Rs1,02,699 per square metre.

MMRDA raised Rs1,322 crore from this auction, around 31 per cent lower than its expectations, as suggested by reports. MMRDA Joint Commissioner Milind Mhaiskar granted that the response was inhibited for the commercial plots, attributing it to adverse market conditions, or to a 'wait-and-watch policy' by industry players.

However, industry sources are treating this as a clear and precise indication that a slow down in the commercial real estate space, has very much arrived, even though Mhaiskar ruled out the lowering of the reserve price for upcoming auctions.

Reports say that the global equity sell-off and the US subprime crisis have dampened investor interest in real estate stocks, which may even bring to an end  a four-year rally in the property markets. At least in the commercial property space, reports suggest that prices could climb down by up to 20 per cent in Mumbai's suburbs. In the remainder of the country too, prices are seeing a downtrend, given the increasing supply and slower sales.

Jet Airways was the lone bidder for the commercial space, and had bid Rs826 crore. Prasun Sengupta, Vice-President, Corporate Administration, had clarified that the airline was looking at the spot for its global headquarters. This is in stark contrast from last November, when real estate prices in Mumbai peaked to a record high with the Wadhwa Group bidding Rs5.04 lakh per square metre for a 7,107-square metre commercial plot at the Bandra-Kurla complex.

Bandra-Kurla Complex, popularly known by the acronym BKC, had been touted as a hot shot business district and an alternative to the now crowded downtown business district of Nariman Point.