A tepid response to the first round of the transport department’s effort to unlock some of its unused land has prompted the government to ease the terms of contract, a step many believe is Mamata Banerjee’s brainchild to brand Bengal investor-friendly.
Unlike in the first round, the winning bidder does not have to cough up 95 per cent of the bid value within a month. Around 25 per cent of the contract amount within a month will do. The remaining portion needs to be paid after the transport department is ready to hand over the plot.
Bidders in the first round were required to make almost the full payment for a plot long before getting possession. “There was an element of uncertainty in this clause. The market can see huge fluctuations in the six to eight months that a bidder needs to wait for the land to be handed over,” Harsh Vardhan Patodia, president of Credai Bengal, told Metro.
“Organising finance for a project would be impossible minus possession of land,” said Patodia, whose organisation is the largest confederation of real estate developers in the east.
Under the old terms of contract, a bidder had to pay 0.3 per cent of the bid amount as annual lease fee for 99 years. This has been modified. A bidder would now have to pay Re 1 a cottah per year. “Suppose a company signs a deal for 241 cottahs at Rs 50 lakh a cottah. The lease fee would have been close to Rs 36 lakh annually under the previous terms. Now, the company would need to pay Rs 241 annually,” an official said.
After the first round, some companies had complained that the terms fixed for participation in bidding were not investor-friendly. “Most of them were worried about paying 95 per cent of the bid amount within a month,” an official said.
The government had announced its decision to unlock 373 cottahs of “surplus land” in six depots of the Calcutta Tramways Company (CTC) in October 2013. Bids were soon invited for a 99-year lease, renewable for a similar period.
Two months later, when the bids were opened, it emerged that no company was keen on the 31 cottahs at Shyambazar, which the government had thought was prime real estate. Only one showed interest in the 52 cottahs on offer at Belgachhia. The 241 cottahs in Tollygunge attracted two bidders.
Power utility CESC was the highest bidder for the land in three other depots — Kalighat, Galiff Street and Kidderpore — that worked out to 49.16 cottahs. CESC paid Rs 27.73 crore for the three plots amid speculation about the reasons for many big-ticket investors not showing interest in bidding for prime land.
According to the finance department’s norms, at least three parties need to bid for a plot for the process to be considered valid. In the event of “re-bidding”, the finance department can settle for the highest among two should a third bidder stay away.
Some real estate developers said the government’s “performance guarantee clause” in the bid document with a deadline of five years for completion of the planned projects was unrealistic.
According to the performance guarantee clause, a bidder winning a deal would have to complete the proposed project within a period of five years, failing which the government would have the discretion of cancelling the lease and pocketing the performance guarantee amount of Rs 2 crore.
Industry experts said it made sense for the government to include such a clause, but that would be constricting for developers or any other company planning a project. “It takes nearly three months for a project to start after getting possession of land and almost seven to eight months to get a completion certificate. In any case, the CTC would be handing over the land after a gap of nearly six to seven months,” said a Credai member.
It has now been decided that the CTC would hand over land to the company winning a bid within three to four months. “We have also decided to do away with the clause that says a company wanting a refund of the performance guarantee amount would have to furnish a certified completion certificate from the civic body,” said an official of the legal remembrance cell. “The company can now seek refund immediately after it sends the notice of completion to the civic body. “
The notice inviting bids for the second round is expected by the end of this month.