Why Sahara’s Aamby Valley auction is set for failure

A consortium of developers can consider bidding for the integrated township spread across 6761 acres for which the reserve price is Rs 37,392 crore.

Some foreign entities such as Chinese on from Singapore may consider it. A Singapore based developer backed by an Indian developer who understands the Indian regulatory mechanisms may think of bidding, explain real estate firms. Some could consider land in the area to set up training centres. ICICI Bank already has a training centre in the vicinity. Companies can set up their training centres or commercial centres in the area

Assuming that somebody is interested in buying up a part of this property, selling it in parts is not possible without having reworked on the Master Plan of the area to sell it to multiple users often referred to in real estate parlance as strata sale versus bulk sale.

Why are developers wary of buying Sahara properties?

The biggest challenge for developers to pick up Sahara lands located in Tier 2, Tier 3 and Tier 4 towns is that out of the 100 odd properties, almost half are not saleable, claim real estate builders. A list of 30 properties has been on auction for 8 to 9 months. But there have been no takers.

While almost 20 percent of these properties are located in prime areas, most of them command a circle rate that is higher than the market rate. Media reports have said that corporate houses such Tatas, Godrej, Adani and Patanjali apart from real estate developers including Omaxe and Eldeco have shown interest in buying Sahara group's 30 properties. But no sale has gone through.

Most developers today are stretched and with RERA coming in, they are looking at joint development options rather than outright purchase of large land parcels, say some builders.

The other challenge pertains to circle rates prevailing in these areas. These are higher than the market values. Also, under a section of Income Tax Act, if a property is transacted at a lower market value, the difference will be considered as income for the developer for which he will have to pay income tax at the rate of almost 30 per cent.

“Even if some of the properties are located at prime land parcels, the income tax and high stamp duty to be paid on such properties in addition to the quoted price makes these properties unviable,” says a developer.

Another issue is to do with RERA claims. Some of the properties have already seen pre launches. Builders fear that some buyers may stake claim for interest penalty for such properties as these have to be bought on an as is where is basis.

Will it meet the same fate as Kingfisher properties?

The two are not comparable as one is valued at s 37,000 crore and is spread across 10,000 acres whereas Kingfisher properties were much smaller and valued for much less.

“The biggest concern for this property is size itself.  Hope to realize Rs 37,000 crore which is almost US$ 6 billion, unlikely to realize this kind of amount in today’s market. Even if a consortium were to enter, an amount of US$2 billion each from six bidders is a big challenge. None of the foreign investors have entered into such a big deal in a yea,” says a real estate adviser.

After three failed auctions, banks have finally managed to sell the Kingfisher Villa in Goa belonging to businessman Vijay Mallya to actor-producer Sachiin Joshi for Rs 73 crore through a private treaty after three failed auctions.

The villa in north Goa has finally been sold to Joshi for Rs 73.01 crore, far less than the reserve price the bankers set at upwards of Rs 90 crore for auctions, which failed thrice.

The villa, spread over 12,350 square feet or three acres at Candolim (on the way to Fort Aguada), was legally owned by United Breweries Holdings, the parent of the airline. The lenders had taken physical possession of the villa in May 2016.