Calcutta, May 31: A consortium of city-based real estate developers said to be led by Avani Group has acquired rights to an EM Bypass land parcel originally meant for a Hilton hotel venture and decided to turn it into a mostly housing project.
The shift strengthens a perception that against the backdrop of the overall economic situation and grim investment climate, housing construction is one of the few segments ' if not the only one ' booming in Bengal. Construction in itself is not an undesirable economic activity but replacement of hotels with houses usually means long-term business prospects have dimmed.
The consortium has secured the rights to the 5.59 acres from DLF, the Delhi-based real estate giant, for Rs 450 crore, two real estate sources told The Telegraph separately.
The newspaper contacted Anirudh Daga, the managing director of Avani, this evening for comments. Daga said he was out of town and would need time till Monday to respond. Efforts to get a reaction over the phone or through text messages drew a blank. The Telegraph will publish Daga's comments when he responds.
Asked whether DLF has relinquished or transferred its rights to develop a hotel/residential block on the EM Bypass plot in favour of a Calcutta-based consortium led by Avani Group, DLF spokesperson Sanjey Roy said: "We do not comment on market speculation."
DLF had outbid several other big groups and paid Rs 155.55 crore in July 2006 to take the land on 99-year lease from the Calcutta Municipal Corporation. The realty powerhouse had then proposed to build a five-star hotel on the land in partnership with Hilton International.
The new right-holders are planning to build a "super-premium" residential block on 80 per cent of the area, leaving the rest for a hotel. The CMC has agreed in principle to the change but the formal approval is yet to come through.
The proposal to change the land use has caused heartburn among some city-based developers who feel they have been denied a level playing field, saying residential projects offer quicker returns than hotel ventures.
"The land was auctioned for a specific purpose. Many players had then bid or refrained from participating after internally working out the business prospect of developing a hotel there. If it was known that the authorities will allow a residential project, more players could have joined with higher bids, which would have made the CMC also richer," said a city-based developer.
But corporation officials said unreasonable restrictions could not be imposed on land use when investors have paid a high price for the land. When the overall economy is in a moribund state, it makes sense to focus on housing than on hospitality, they added.
The land use break-up was changed in two phases. The then Left Front board at the CMC had allowed a partial conversion. DLF's application to use 49 per cent of the land for a residential project was approved at a mayor-in-council meeting of Bikash Ranjan Bhattacharyya on May 28, 2010.
The proposal for the 80:20 ratio was filed after the Trinamul Congress returned to the helm of CMC and Sovan Chatterjee became mayor.
In November 2011, DLF Hotels and Hospitalities sought permission to use 80 per cent of the land for a housing project and 20 per cent for a hotel. The company informed the CMC that Adone Hotels and Hospitalities Ltd would look after the proposed project. The Telegraph could not establish who runs this group and was unable to get in touch with any company official.
The CMC assessed whether 20 per cent of the 5.59 acres would be sufficient for a hotel. The land set aside was found viable and the Trinamul-led board decided in principle to approve the project on payment of Rs 36 crore to the CMC. The matter is yet to be placed before the mayor-in-council meeting for approval.
The residential project has already been soft-launched with an initial offer of flats at Rs 11,000 per square foot. One of the consultancy firms marketing the scheme said the project would be launched in public in two to three months at Rs 14,000 per square foot.
"There will be two towers of G+36 floors, having 150 flats in total. But for a booking now, 72 per cent down payment has to be made," an executive of the consultancy firm said over the phone. He said the size of the flats would be 3,000sqft and the price for each unit could add up to around Rs 5 crore.
Developers who lost out raised questions whether the CMC can allow such a change in the use of land. "The CMC cannot sanction the new plan even after accepting a fine. If it is agreeable to allow housing, the land should be taken back by the CMC by repaying DLF and put to auction again to ensure a level playing field for all," said a developer.
"You can expect to make a profit in two to three years in housing compared to seven to 10 years in hotels. Moreover, the developer hardly needs to arrange funds for housing where booking money is used as seed capital. For a hotel, the developer needs to secure all the money to build the property," he added.
The DLF decision to exit in favour of a housing project reflects the changes in the real estate market and economy (both in Bengal and the rest of the world) over the past five years.
When the CMC started auctioning land along the bypass, hopes were running high about then chief minister Buddhadeb Bhattacharjee's industrialisation initiative.
Emaar MGF had paid Rs 213 crore for land for a Marriot hotel, not too far from ITC Sonar. DLF checked in on July 26, 2006, and Hilton joined in August 2007. However, the land war changed the mood in Bengal, which was followed by the global economic meltdown.
The real estate and hospitality market slumped across the country. Many investors then realised that hotel ventures alone may not be a viable proposition. It is not clear if such an assessment prompted DLF, which has parted ways with Hilton, to seek changes in the land formula.