The auction of six properties belonging to Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL), the sale of which had been expected to raise around Rs 3,000 crore, has received a tepid response, officials said.
The properties include four BSNL land parcels and residential flats in two properties owned by MTNL.
No response had been received to the auction of land assets belonging to BSNL, officials told Moneycontrol.
Real estate and valuation experts said one of the reasons for the inadequate response may be that the land prices are 50-80 percent lower than the reserve price, adding the prices would have to be lowered in subsequent rounds of bidding.
One valuation expert pointed out that even if subsequent rounds of bidding meet the same response, the only option left would be for another government entity to pick up some of these land parcels for its use.
Revival package
Monetisation of MTNL and BSNL assets is part of a revival package announced by the Centre in 2019, and the Department of Telecom (DoT) had been expecting Rs 3,000 crore from the sale of all six properties.
It was the first auction of non-core assets of BSNL and MTNL through the asset monetisation portal of the Department of Investment and Public Asset Management (DIPAM).
The government has stepped up efforts to dispose of the vacant land and other assets of central public sector undertakings (PSUs) after having sold Air India to the Tata Group. For the purpose, it formed the National Land Monetisation Corporation (NLMC).
In all, 3,400 acres belonging to MTNL, BSNL, Bharat Petroleum Corporation (BPCL), Bridge and Roof Company (India), BMEL and HMT have been identified for sale. NLMC will oversee the sale of the land.
The Centre, in its Union Budget, declared that NLMC had been constituted as a purely central government organisation with an initial share capital of Rs 5,000 crore and subscribed share capital of Rs 1.50 crore. By way of sale of the assets, the Centre is likely to mop up Rs 6 lakh crore during 2021-22 and 2024-25.
Property consultants
DIPAM has asked its property consultants to identify issues in the bidding criteria for the BSNL and MTNL properties that need to be resolved. CBRE South Asia, JLL Property Consultants (India), Cushman & Wakefield, and Knight Frank (India) are acting as consultants to the government on the sale of the six properties.
Officials said that there were no takers for a land parcel located in Hyderabad which is valued at around Rs 400 crore and the one in Rajpura, Punjab valued at Rs 70 crore.
They added that the response to the sale of the residential flats had been favourable. Discussions are currently under way on whether to hold a second round of bidding for all the six assets.
On the block is a land parcel in Gujarat is located in Chitra, Rajkot Road, Bhavnagar. According to the information contained in the Request for Proposal (RFP) document provided to the bidders, BSNL owns the land parcel spread across 5.59 acres.
The property comprises of 11 residential blocks, namely Type-I – 2 blocks (22 quarters), Type-2 – 4 block (44 quarters), Type-3 – 4 block (28 quarters), Type-IV – 1 block (7 quarters) and a community hall that are currently uninhabited. The property was available on an “as is where is, in present condition as it is and No Complaint basis only.”
DIPAM/BSNL appointed Knight Frank India to represent BSNL to identify prospective buyers for this property
There was no response from Knight Frank on why the bid received inadequate response.
The minimum bid that was invited from bidders for BSNL’s 11 acre land in Hyderabad was Rs 402 crore, and interested parties were required to have a minimum net worth of Rs 100 crore. According to the RFP, the land parcel comprises of BSNL Regional Telecom Training Centre at Gachibowli, Ranga Reddy District, Hyderabad, Telangana.
The property is spread across an area of 10.96 acres and is a part of larger layout of RTTC measuring approximately 40 acres, comprising of BSNL office buildings, training centres and residential quarters. It comprises of six residential blocks that are currently inhabited, and shall be vacated by BSNL and handed over to the successful bidder on an as-is where-is-basis.
DIPAM/BSNL had appointed CBRE South Asia to represent BSNL to identify prospective buyers for this property. There was no response from CBRE.
Commercial core
Local brokers told Moneycontrol that this land parcel is located in Gachibowli which is the commercial core of the city. The land rates in the area are anything between Rs 35 crore and Rs 40 crore per acre. Even if the value of land in this case is Rs 400 crore, for the buyer, the numbers should stack up when the buyer launches a project on that land parcel.
“Rs 400 crore is just the beginning of the process, other variables such as construction, approvals and sales will have to follow. Besides, the developer should be able to more than recover the amount spent on the land within six months to a year. The math has to work,” said a local broker.
Another property on the block that failed to garner interest was BSNL’s 20 acre land in Rajpura in Punjab. The government had sought bids of at least Rs 70 crore from interested parties with net worth of Rs 17 crore. This land parcel is located at Regional Telecom Training Centre, Rajpura, district Patiala, Punjab. The property is spread across 20 acres comprises of BSNL office buildings, training centre, hostel and residential quarters.
The buildings and staff quarters shall be vacated by BSNL and handed over to the successful bidder on an as-is where is basis, the RFP document said.
An 11 acre land parcel in Kolkata also did not receive an encouraging response. This BSNL land parcel is spread across an area of 11.16 acres at Madhyamgram, beside Jessore road in North 24 Parganas district, Kolkata. It is a freehold asset of BSNL and is a part of a larger layout of a telephone exchange and staff quarters measuring about 11.40 acres.
It comprises of four residential blocks Type-1 one block (16 quarters), Type-II one block (16 quarters), and Type-III two blocks (32 quarters), which are currently vacant and in a dilapidated state, and shall be handed over to the successful bidder on an as-is where-is basis, excluding the area under the existing telephone exchange and its approach road, according to the RFP document.
DIPAM/BSNL had appointed Cushman & Wakefield India to represent BSNL to identify prospective buyers for the property. There was no response from Cushman & Wakefield.
Reserve price vs. market price
Local brokers told Moneycontrol that one of the reasons for the tepid response to the auction of this land parcel could be that the reserve price is higher than the market price. Usually, reserve price of an area is arrived at after considering several factors such as the future potential of an area, the built up area that can be constructed on the land parcel, the profit a developer can make, the ready reckoner rate and the price at which properties have been transacted in the area in the past.
The two properties in MTNL’s portfolio include a land parcel spread across an area of 1.3652 acres (5,525 sq. m) at Vasari Hill, Malad, Goregaon (West), Mumbai. According to the document, the property currently has an encroachment of approximately 502.74 sq. m of area in south west side of the site out of a total 5,525 sq. m (1.3652 acres) and will be handed over to the successful bidder on an as-is where-is basis. DIPAM/MTNL has appointed Jones Lang LaSalle Property Consultants India to represent MTNL to identify prospective buyers for the property. There was no response from JLL.
Prime area
Local brokers told Moneycontrol that this plot is located in a prime area and is surrounded by residential projects by prominent developers that command a price of Rs 25,000 per sq. ft to Rs 30,000 per sq. ft on carpet. They said that the reserve price in this case too could be higher than the market price.
The only property that seems to have received a favourable response compared to the others consists of the 20 flats owned by MTNL located at Raheja Classique, Oshiwara, Link Road, Andheri (W), Mumbai, officials said.
The location is very prime and is one of the most significant areas in Andheri (West). These apartments of different sizes are priced between Rs 54.73 lakh to Rs 1.59 crore, according to the documents.
The mandate for the sale of these units was given to Knight Frank. There was no response from Knight Frank.
According to local brokers, 2BHKs of size 580 sq. ft, studios of 180 sq. ft and 1 BHK of 390 sq. ft have been sold. A few 1BHK units that are priced around Rs. 1 crore are yet to be disposed of.
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