In what real estate experts see as a sign that land rates are becoming more realistic, a 135-acre plot that belonged to the defunct PAL-Peugeot auto company in Dombivli has been auctioned off to Metropolitan Infra Housing Pvt Ltd (a subsidiary of Gammon India) for Rs 601 crore.
Bombay high court Justice R Y Ganoo on Friday confirmed Gammon’s bid following a December 2010 auction. This is the latest development in a nearly 12-year saga to sell a total of 180 acres located 5 km from Dombivli station.
Gammon’s bid was merely a crore higher than its nearest competitor, Neptune Group. Oberoi Realty, the third bidder, offered Rs 300 crore.
Aside from rates dropping, experts said the deal is important considering the liquidity crunch in the market.
Dombivli land unlocked
May 12, 1999: ICICI Bank files suit for recovery of Rs 136 crore from PAL-Peugeot
May 12, 1999 to Jan 27, 2004: Four unsuccessful auctions for 180 acres
Sep 26, 2005: PAL-Peugeot winds up
Nov 27: State files notice seeking unearned income on 45 acres
Mar 4, 2008: HC splits land into 135 and 45 acres
Apr 22: Indiabulls wins auction with Rs 676-crore bid for 135 acres
Jun 27: Indiabulls withdraws offer as it can’t match Rs 1,650-crore reserve price
Jan 21, 2011: High court confirms Gammon India’s winning bid
Feb 1: High court to decide on remaining 45 acres ‘Land rates in tune with market conditions.
The court’s order is also significant for 1,712 displaced Pal-Peugeot workers,who will finally get dues that have been pending since the company shut down in September 2005.
“The order will especially benefit about 40 workers who were on the verge of losing their homes as they had defaulted on loans taken from HDFC Bank in 1995. The bank, thankfully, accepted our plea to delay sealing the flats, as we explained that the court’s order on the auction was due anytime. I pray now that we receive our dues before March 31 so we can repay the loans,” said Umesh Upadhyay, secretary of the Sakharam Seth Employees Union, the registered trade union of PAL-Peugeot. The union expects to get dues of Rs 125 crore for the period from June 1998 to September 2005.
In the earlier round of bidding-the sixth-in April 2008, the highest price offered was Rs 676 crore by Citra Developers, a subsidiary of Indiabulls Real Estate. Gammon then was no. 2 with a bid of Rs 675 crore. Indiabulls’ offer did not go through because the court receiver had fixed a reserve price of Rs 1,650 crore.
The high reserve price-Rs 2,855 per sq ft for undeveloped land-is a reflection of the staggering expectations that prevailed not long ago. The reserve price fixed in the latest round was a more realistic Rs 450 crore. Experts said this is more in tune with current market conditions.
Real estate experts said the substantially lower price offered in the recent bidding indicates that land rates that had shot up after the recession are starting to soften.
“The price in this auction seems reasonable, considering the liabilities on the land. Still, it will allow Gammon to make some margin of profit after development,” said Pranay Vakil, chairman of Knight Frank, global property consultants.
PAL-Peugeot’s original 180-acre plot was put up for auction in 1999. It was split into 135 and 45 acres in 2008 when the state claimed its share of unearned income. The high court has not confirmed the sale of the 45-acre plot as the bid amount was much lower than the reserve price fixed by the court receiver.
PAL-Peugeot’s land was put up for auction after the company failed to pay the interest and value of 3,41,98,066 non-convertible debentures to ICICI Bank, trustees for the debenture holders. ICICI Bank, which was represented by Maniklal Kher Ambalal and Co, filed suit in the high court for Rs 136.79 crore, the principal amount.
The high court then appointed a court receiver and asked for the sale of properties, including the land. The first four auctions failed as the highest bids did not match the reserve price.
The fifth auction was never held as the state intervened. The sixth auction involved the Citra bid, which the high court allowed Citra to withdraw and reclaim 25% of the amount deposited.
The workers’ union challenged the court’s decision and asked for a reduced reserve price. It wanted Citra’s offer accepted, as a sale would ensure reimbursement of dues.
The high court refused and the union moved the apex court. During the hearing, the court asked Citra to give a fresh bid considering a reserve price of Rs 550 crore in light of the economic slowdown. Citra declined. The SC told the high court to carry out a fresh valuation and hold another auction.