Air India’s plan to monetize vacant building is hit by existing tough market conditions. Civil Aviation Minister Mr. Ajit Singh said that the AI’s Plan is severely affected by the tough market conditions existing in the real estate.
The plan of Air India to lease vacant floors in Nariman Point headquarters is fronting tough market conditions. However Civil Aviation Minister Mr. Ajit Singh said that he is confident of working out the plan to monetize the real estate properties of AI.
Air India’s plan to monetize the real estate properties was meant to raise Rs.5, 000-Crore. The government owned National Carrier had expected to raise the fund by leasing or selling of real estate properties in Delhi and Mumbai.
The National Carrier has real estate properties and offices in Indian cities as well as overseas. As per the Air India plans, 11 floors (total 1.6 lakh sq. ft.) of the 23-story Air India building were to be leased. However the National Carrier was forced to postpone the bid date due to the tepid response from the companies. The new bid will take place on Nov-29.
Air India uses only 6 floors in this building and three are leased out. The remaining floors are not used and kept vacant. The National Carrier plans to shift its Headquarters to the capital and lease out the entire building to the private firms.
Mr. Singh acknowledged that the plan to monetize real estate properties was obstructed due to sectoral problems. He pointed to the fact that the building is located in an old area from where people have started shifting to new areas. The severe situation which the real estate faces is a main reason of the failure.
However Mr. Singh said that the National Carrier will be able to carry out its plan. He added that Air India has already employed a real estate consultant to carry out its plan.
According to real estate consultants and property experts, the Air India building at Nariman Point is no longer the preferred. They remain skeptical about the prominence of the building. They opined that the building is no more able to address the office needs of any companies.
According to real estate consultant Mr. Raja Seetharaman the business people and the Corporates think of shifting to areas like Lower Parel or the Bandra Kurla Complex (BKC) where rentals are lower. The rental of these areas is Rs.200 per sq. ft. while the same at Nariman Point is Rs.250 per sq. ft.
Mr. Seetharaman pointed the incident in which Hindustan Unilever was forced to bid their real estate property at a lower rate than they expected. Hindustan Unilever planned to lease their Churchgate property at Rs.350 per sq. ft. Yet the deal was fixed at Rs.200 per sq. ft. to Rs.250 per sq. ft.
Another realty consultant added that BKC is more preferred these days. The lower rates existing in BKC and Lower Parel attracts the people greatly he added. In his opinion Air India will not be able to lease their properties at the estimated rate.
Jones Lang Salle’s 2011 report, it stated that Air India is losing nearly Rs.80-Crore per year without utilizing the building at Nariman Point which was constructed in the mid-1970s. The amount is calculated at the normal rental rate of Rs.300 per sq. ft. at Nariman Point. Now the chance of attaining the same amount seems impossible.