Air India invites bids from only central govt entities for Mumbai building

National carrier Air India has invited bids from central government organisations to sell its iconic Nariman Point building after the initial proposal for its sale to Jawaharlal Nehru Port hit a hurdle.

Only central government entities such as public sector units, port trusts and other organisations fully owned by the government can bid for the 23-storey building, Air India said on Monday in a tender notice. The last date for bid submission is December 31.  

Property market sources say the sale could fetch the airline Rs 10-12.5 billion given the current property rates of Rs 25,000-30,000 per square feet in the area. Currently, 17 of the 23 floors in the building have been rented out to Tata Consultancy Services, Bank of India and various government departments, and earn over Rs 1 billion for the airline.

According to bid conditions, Air India will retain 5,000 square feet office space on the 22nd floor and also the logo atop the building, and no rent or compensation will be paid for the same. The name of the building will remain unchanged.

“Restricting bids to government bodies only would certainly limit the number of buyers. Nariman Point still houses wealth management firms, lawyers, professional and consultancy firms, banks, and consulates. High efficiency buildings and small-sized offices are available in Nariman Point, which can still find takers,” said Abhishek Kiran Gupta, co-founder at CRE MATRIX, a commercial property data analytics firm.

The sale of Air India building is a part of the airline’s asset monetisation plan, which has been moving slowly because of tough real estate market conditions, unclear titles and absence of government approvals. The recent proposal to sell the building to JNPT was abandoned after the civil aviation ministry expressed reservations over the sale without inviting tenders. Besides one staff union, Air Corporation Employees Union, had objected to the sale, instead proposing mortgage of the property for loan.

Independent directors on the Air India board were against the government-to-government sale of the building. The civil aviation ministry had earlier mooted the proposal for sale and had asked the government departments to come forward.

Union shipping minister Nitin Gadkari had in July announced that JNPT would buy the building as the government wants to retain its ownership.  Sources had earlier indicated that JNPT itself was not keen on the takeover as the major port is not into real estate business.

"We are looking to raise about Rs 90 billion from the sale of land and property assets of Air India. These include Air India building in Mumbai, realty property in Delhi's Vasant Vihar and land in Baba Kharak Singh Marg, next to Connaught Place," a civil aviation ministry official told PTI last week.

Constructed in 1970, Air India building in Nariman Point stands on 7,500 square metre leased from the city collector for 99 years. The lease deed was executed in 1990 but the 99-year period is computed from 1961 when the land was leased. The sale will cover both leasehold rights of the land and 23-storey building.

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