National carrier Air India’s plan to rent out most floors of its iconic 23-storey building in the megapolis that till recently was its headquarters, has hit a stonewall on pricing, as companies are reluctant to pay the rentals being sought by the airline, sources said.
“The airline has set a base rental of Rs 350 per sq ft per month and there are no takers at this price,” Air India sources said
The source, however, added that the problem has come up only at the Mumbai property and the plans for Kolkata, Chennai and Delhi are on as per the schedule.
As per its approved financial restructuring and turnaround plan approved by the Cabinet in early 2012, when it had bailed out the carrier with Rs 30,000 crore dole out, Air India is required to raise Rs 5,000 crore over the next 10 years through asset monetisation and its biggest asset is the iconic Air India building in the tony Nariman Point area of Mumbai.
As part of the asset monetisation programme, Air India will lease out its properties in key cities as well as some overseas properties.
The airline has plans to rent out its properties in Mumbai (its previous headquarters and four flats on the Sterling Apartments on the tony Peddar Road area in south), Delhi (flats on the Baba Khadak Singh Marg), Kolkata and Chennai.
The airline had earlier sounded quite positive following the public sector lender State Bank leasing four floors, measuring 54,000 sqft, on the Air India building here for a hefty rental of Rs 20 crore year.
“The realisation was much higher than the Rs 200-250 a sq ft estimated by analysts, who expect the rentals in the Nariman Point area to fall as business activity in the city shifts to newly developed CBDs like the suburban Bandra Kurla Complex and Andheri,” sources said.
The Directorate General of Shipping (DGS) had initially evinced interest in the landmark property but as the airline stuck to its high base rentals, the plan failed to fructify, sources said.
“The Income Tax and Service Tax departments also want to take up space in the building but higher rentals are preventing them,” sources said.
While the DGS is ready to offer Rs 290 a sqft, Income Tax and Service Tax departments are not ready to offer rents more than Rs 300 a sqft, the source said.
Air India had first tendered for 1.60 lakh sq ft and got interest for 94,000 sq ft. However, it could lease out only 54,000 sqft to SBI.