Mumbai’s iconic Air India building might soon be the new address for offices of the Maharashtra secretariat. In what is perhaps the first instance of the state buying back land it had leased, the government has offered the national carrier Rs 1,400 crore to take over the property.
While the state’s offer is Rs 200 crore less than the reserve price Air India had set, sources said the national carrier has decided to go ahead with it as part of its plan to monetise its real estate assets.
The Centre-run Jawaharlal Nehru Port Trust (JNPT) and the Life Insurance Corporation (LIC) had quoted Rs 1,375 crore and Rs 1,200 crore, respectively, for the property.
Air India, which has run into debt of Rs 50,000 crore, had first put up the sale of leasehold rights of the land and the building last December. Maharashtra had leased the sea-facing property to the carrier in 1970 for a 99-year tenure.
During the first round of bidding, only the LIC submitted a quote, prompting a second round. The state government used its status as the land’s owner to invoke the “first right to refusal” condition before edging past JNPT. Only government entities were permitted to participate in both rounds.
Talks were also held between Maharashtra Chief Secretary U P S Madan, Civil Aviation Secretary Pradeep Kharola and Air India’s managing director Ashwani Lohani last week where further negotiations took place. “If everything goes as planned, we may take possession before June-end,” said a senior state government official.
However, it may well be over two years before the government can use of most of the floors. After the airline’s headquarters were shifted to Delhi in 2013, nearly 5 lakh square feet of office space on 17 of the 23 floors in the Mumbai building was rented out.
“We have asked Air India to ensure there is no renewal of rental agreements after the expiry of the current period. Due to a paucity of space in Mantralaya, offices of the state secretariat operate from various locations currently. We’re paying high rentals and face efficiency related issues. All these offices can be accommodated in the Air India building,” Madan said.
According to rules, the government is entitled to recover a transfer fee (or unearned income) from the lessee for the assignment of the lease, which is equivalent to one-eighth of the market value of the property. But Air India has sought a waiver of this payment as a special case. “We’re examining their request,” said Madan. Officials said this fee would work out to Rs 150 crore in Air India’s case.
Air India, meanwhile, has also sought time to move its art collection, situated in a 9,000-square feet space on the first floor, to the National Gallery of Modern Art (NGMA). It has been in talks with the Ministry of Culture on the matter of preservation and the upkeep of over 2,000 artefacts.
With Air India keen to retain its 5,000-square feet booking office on the ground floor, the government has said it can exist on a rental basis. Air India will be allowed to display its logo on the top of the building even after the acquisition, said Madan. When contacted, Lohani declined comment.