Four hotel chains have submitted bids for a plot to build a five-star hotel in Navi Mumbai, at a time when land prices have dipped in Mumbai and surrounding areas.
Indian Hotels Co. Ltd, which owns the Taj group of hotels, Sun-n-Sand Group of Hotels, Leela Palaces, Hotels and Resorts and Metropolis Hotel have submitted technical bids in the auction for the 11.6-acre land on the Palm Beach Road. The bidders, if their technical bids qualify, will have to submit financial proposals on Friday.
The City and Industrial Development Corp. of Maharashtra Ltd, or Cidco, which is conducting the auction, had set a minimum price of Rs37000 per square meter for the plot, nearly half the price at which two plots were auctioned in 2007 by the same organization in Navi Mumbai.
The slowdown has impacted the few land auctions this year. Last week, Cidco received only one bid in an auction for a plot reserved for an IT park. The land was sold at Rs1 lakh per sq. m, less than the Rs1.5 lakh quoted for a plot in the same area in 2006.
Pranay Vakil, chairman of real estate agency Knight Frank India Pvt. Ltd, said it is “not a good idea” to hold a property auction in a falling market. He added, “We are not encouraging auctions now, because the psychology is not to outbid people but to underbid”.
Vakil Said, “Auctions, as we can see, would inevitably not receive enough bids. Private negotiation for property and land sale is a much better option over auctions now”. Further he pointed out that land prices have dipped by 15-30% in Mumbai and Navi Mumbai this year. The signs of the real estate market heading for a correction in Mumbai started showing when two out of five plots went unsold in the central business district of Bandra-Kurla Complex in an auction in March.
Cidco managing director G.S. Gill said, “We are not private developers or landowners who are waiting for the market to go up. We continue to develop and sell land”.