5 things you don't know about the Maharashtra govt’s Rs 1,601cr acquisition of Mumbai’s Air India building

On November 08, 2023, the state cabinet approved the purchase of the 22-storey building from Aira India Assets Holding Limited, a company that looks after Air India's properties.

One of Mumbai's iconic edifices, the imposing, sea-facing Air India building in south Mumbai’s Nariman Point, may be sold for Rs 1,601 crore. On November 08, 2023, the state cabinet approved the purchase of the 22-storey building from Aira India Assets Holding Limited, a company that looks after Air India's properties.

Moneycontrol tells you five things about the building, its neighbourhood,  and the commercial real estate scene of south Mumbai.

History of the building:

The building that the Central government had put on sale was constructed in 1974 for the then-national carrier. Designed by John Burgee of the New York-based architecture firm Johnson / Burgee, the building is just 100 metres away from the shore, and faces the international waters of the Arabian Sea. Burgee was known for his contribution to post-modern architecture during the 1970s.

The building was one of the targets of the 1993 Mumbai bombings. A car bomb exploded on the afternoon of March 12, 1993, in the basement garage of the building.

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Post 2010, the Air India headquarters started to move out from Mumbai to Delhi. Later, Tata Consultancy Services (TCS), the State Bank of India, the goods and services tax (GST) department, the income tax department, and the shipping department moved are some of the key parties that have occupied the building as tenants in the past.

Government plans

According to the Maharashtra government, the 5 lakh square feet of space will be used for housing different government departments. "After the fire in Mantralaya next door a decade ago, many departments are scattered far from the state secretariat. However, after the government moves into the erstwhile Air India headquarters, it will save the Rs 200 crore that is being spent on renting space for different departments,’’ the Maharashtra government said in a statement on November 08.

Surroundings of the building

The Air India building is surrounded by several Grade-A and  Grade-B office spaces, along with several luxury hotels and residential buildings. At one time, Nariman Point was among the costliest commercial areas of Mumbai. Later, areas like Lower Parel (central Mumbai), Worli, and of course, Bandra Kurla Complex (BKC) — India's costliest commercial real estate —  have taken centre-stage with respect to office space.

However, certain businesses, such as certain mid-size private companies, professionals (lawyers, chartered accountants, consultants), and government-related businesses, favor south Mumbai to be close to their ultra-high net worth (UHNI) clientele residing here.

The presence of Mantralaya, the Bombay Stock Exchange (BSE), hotels, and the overall ecosystem in this micro-market augurs well for businesses in wealth management and family office-related work, according to a report by Savills India, a real estate consultancy firm.

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Office rentals

The Nariman Point area, also known as the old central business district (CBD),  also includes other areas of south Mumbai, like Cuffe Parade, Ballard Estate, Fort, Churchgate, etc.

However, office rents have been on the decline in the old CBD areas, which have dropped by about 13 percent since 2019, according to the data of Savills India. The per square feet (psf) monthly rent has gone down from Rs 255 to Rs 222, as of Q1 of 2023. The share of old CBD in overall Mumbai leasing has remained sub-5 percent in the last four years, according to the data.

Outlook for south Mumbai

The focus of banks, institutions, and a lot of large corporations has switched to BKC and central Mumbai owing to the larger office space and Grade A amenities there. The prices in the old CBD are low currently, and they have come down from their peak in 2010. This can be partly attributed to the limited potential of new supply in the region due to scarcity of land, noted Savills India in its analysis shared with Moneycontrol.

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According to the consultancy firm, if existing buildings are retrofitted/redeveloped to bring in newer amenities and the latest technological advancements, south Mumbai can emerge as a preferred choice for certain businesses and professionals, especially those in government-related businesses, for which they need to be in and around the area.