Its just not the realty stocks, but the Land Prices [a mini sub-prime bubble in Mumbai] has cracked. The Rail Land Development Authority (RLDA) recently reduced the minimum reserve price for 45,371 sq meters plot at Bandra (E), Mumbai by 14.4% from Rs46.28 bn to Rs39.6 bn. The location of the plot is near established business district of Bandra-Kurla Complex in Mumbai and the available FSI on the plot is 4.
Additionally, our Analyst tracking the deal said RLDA has removed the option of bullet payment for the land cost and extended the time lines for the installment option from 24 months to 60 months is enough evidence of tight market condition for real estate developers.
Finally, we believe that the revised reserve price of Rs39.6 bn is still on a higher side due to fall in rental values and will require developers to bid with aggressive rental assumptions[unfeasible] and other means of increasing the available FSI.
In another deal, MMRDA invited bids for commercial and cinema complex at Wadala in Central Mumbai, for which it got very a poor response. Real estate developers in the re bid meeting with MMRDA officials indicated that the reserve price for the plots is high as compared to the market prices. MMRDA has revised the last date for submission of bids from 23 September 2008 to 15 October 2008.
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