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Air India HQ attracts few takers

Weak response from private sector corporate houses to Air India's proposal to lease out its sea-facing HQ building at Nariman Point in South Mumbai has strengthened the case of its lenders and other public sector enterprises.

Air India's lenders, who had earlier planned to take up space in this iconic building, are keen to move in and formalise the transaction, said persons familiar with the development.

Air India, however, declined to comment on the developments.

The bids for a total 159,000 sq ft space in this building, which were scheduled to be opened on November 3, have now been rescheduled to November 29.

Property consultants attribute the lukewarm response from private sector companies to a few factors, including security deposits and the overall sluggish environment in the commercial realty market.

In October, Air India started leasing out 12 of this 23-storey tower with November 3 as the last date for submission of interest.

Each applicant was expected to pay an earnest money deposit of minimum Rs 50 lakh per floor subject to a maximum of Rs 1 crore.

The airline had declared by then that it was shifting its HQ to New Delhi, and wanted to lease some of its floors.

Bidders were expected to bid for a minimum floor with the airline saying that preference would be given to those who planned to occupy entire floors.

Although Air India did not mention the base rental for the property, it said that higher floors would attract a floor rise of 5 per sq ft.

According to property consultants, an escrow mechanism can be deployed if lenders finalise the lease transactions with Air India. Under this, lenders who pick up space through lease will deposit rent in an escrow account and Air India would pay interest on its loans from the same accounts.

Office lease rentals in Nariman Point, Mumbai's central business district, currently hover around 280-290 per sq ft.

Office buildings here are not commanding the same premium as they did five years ago since most corporates are moving to newer commercial centers like the Bandra-Kurla Complex.

In some cases, tenants have even moved to the suburbs for more space and to save on costs.