November 22, 2008

Indian Railways re invites bids for development of land in Mumbai

It is reported that Rail Land Development Authority has changed the bidding model and re-invited bids for commercial development on 45,371 square meters of railway land in a prime location in Mumbai's Western Express highway at Bandra East.

In the new model, RLDA has decided to let the private developer take the entire project structure on lease for 80 years against an upfront payment. The reserve price has now been fixed at INR 4,600 crore based on the Mumbai Metropolitan Region Development Authority rates.

The earlier model had a mix of upfront payment and rental returns. The successful bidder was supposed to build two identical office blocks of same size and quality; operate one building on lease for 80 years and handover the other free of cost to Railways. RLDA had fixed the reserve price at INR 1,750 crore. So, for one block, Railways would have received upfront payment from the developer; while for the other, it would have earned rentals.

To make the project more attractive, Maharashtra Government has doubled the floor space index to four from two, which would allow the developer to commercially exploit a larger area. The doubling of FSI was subject to condition that the entire benefit of incremental floor space should accrue to rail projects of Mumbai and Maharashtra in 2:1 ratio.

From the initially conceived FSI, one third proceeds would accrue to rail projects in Mumbai, one-third to those in Maharashtra and one third to projects in rest of the country.

Earlier, the applicant was required to have completed 50,000 square meter built up area in last five years in the metropolitan cities only. An earlier requirement of an average annual lease income of INR 150 crore during the last three years in metros has also been done away with.