The Telegraph
Since 1st March, 1999
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Realty shock in NTC logjam

Mumbai, Oct. 17: Real estate developers, foreign investors in property projects and would-be buyers of prime real estate have been left in a tizzy while trying to fathom the ramifications of the Mumbai High Court order today that blocked the sale of 600 acres of land owned by the National Textile Corporation (NTC).

Real estate mavens say the order will shake the faith of foreign investors in big-ticket property deals especially since it involves a government-owned entity. One such investor is Farallon Capital, a San Francisco-based private equity fund, which had picked up 60 per cent in a special purpose vehicle called India Bulls Property. The SPV had stumped up Rs 441.75 crore for NTC’s Elphinstone Mills and Rs 276.51 crore for the Jupiter Mills.

“What can you tell a foreign investor who had invested believing that the title deed of the seller (the government in this case) of the property is suddenly deemed faulty by the court,” said Pranay Vakil of Knight Frank, a real estate consultancy.

“We can comment only after we go through the entire judgment,” said Gagan Banga of Indiabulls, even as the top echelons of the stock brokerage-turned-real estate developer scoured the 350-page judgment.

“We realise that this is not the last word on the subject. This is a fight for land,” said a lawyer who appeared on behalf of the environmentalists who petitioned the court to stop the land sale. “We expect the order to be challenged before the Supreme Court.”

At Jupiter Mills, Indiabulls, the new owners, has already razed to the ground the mill structure as it plans to build high-rises and malls. Indiabulls has been waiting for environmental clearances before developing the mill land.

“The order will restrict the supply of developed property artificially,” said Vakil. With 600 acres of NTC land coming under scrutiny once again, he expects the real estate rates to rise sharply in the near future.

The court order will also impact private properties being developed by Bombay Dyeing, Standard Mills, Simplex Mills and Morarjee Mills.

Many of the private mill developers had invited bookings some 18 months ago. The rates have since appreciated 60 per cent to Rs 6500 per square feet from Rs 3800 per square feet. The buyers wouldn’t be satisfied by just taking their deposits back as they feel that they have the right to earn the current rates. “Customers who had booked apartments sold by private mills in the skyscrapers that are coming up will refuse to accept their money back,” said Vakil.

Investors who bought textile mill shares like Bombay Dyeing and Morarjee Mills will also be affected. They had hoped that the firms would unlock the value of their land assets by developing them eventually. On the bourses, Bombay Dyeing, which is sitting on prime real estate land, fell by 6.49 per cent to Rs 332.15 from Rs 355.20. National Rayon Corporation fell 3 per cent, Hindustan Spinning surrendered about 5 per cent and Morarjee Realities fell 5 per cent. Private mills will feel the heat in the coming days as most stocks were re-rated on the basis of the real estate story.

The textile mill workers will also be hurt by the order. The sale of land was done basically to pay back their dues and restructure the finances of the mills. The Rs 2000 crore question now is: will the mill workers get their dues'

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