They fetch a meagre Rs. 18.32, Rs. 22.70 and Rs. 15.63 per sq ft

At a time when bulk commercial spaces in busy areas such as Koramangala, Shanthinagar and Banashankari are available for not less than Rs. 50 per sq ft, vast commercial spaces created by the Bangalore Metropolitan Transportation Corporation (BMTC) there have been leased out for a song.

They fetch a meagre Rs. 18.32, Rs. 22.70 and Rs. 15.63 per sq ft, respectively.

The BMTC has created about 1.4 million sq ft commercial space through its 10 Travel Transit Management Centres (TTMCs).

The PPAB Block (2,85,936 sq ft) at the Shanthinagar TTMC has been taken by Athitheya Kshema Hotels Pvt. Ltd. (AKHPL) at a rate of Rs. 22.7 per sq ft, the remaining 88,500 sq ft is leased out to different government departments at Rs. 25.67 per sq ft.

Incidentally, AKHPL has managed to secure large commercial spaces in TTMCs at a price lower than that quoted for government departments, including the Transport Department.

Athitheya has also taken on lease 3,34,568 sq ft space at the Koramangala TTMC at a rate of Rs. 18.32 per sq ft; 76,081 sq ft at Banashankari TTMC at Rs. 15.63 per sq ft; 1,43,529 sq ft space at the Vijayanagar TTMC at Rs. 18.25 per sq ft and 15,400 sq ft at the Jayanagar TTMC at Rs. 25 per sq ft.

The Transport Department has taken 26,000 sq ft space at Jayanagar at Rs. 23.21 per sq ft.

Comfort Homes Inn Pvt. Ltd. has taken 1,15,874 sq ft space at the Whitefield TTMC at Rs. 13 per sq ft and 4,215 sq ft at the Domlur TTMC at Rs. 15 per sq ft.

Two government departments have taken 40,000 sq ft space at the Kengeri TTMC at Rs. 11.78 per sq ft.

Similarly, the first three floors at the Yeshwanthpur TTMC (about 1.22 lakh sq ft) have been leased out at Rs. 20.73 per sq ft to government departments and 40,000 sq ft in the fourth floor is leased out to private players at Rs. 18 per sq ft.

Tenders invited

Instead of managing these spaces on its own as per the existing practice, the BMTC invited tenders from asset management companies for bulk leasing.

BMTC officials claimed that it was impossible to manage the huge space by dividing and subdividing it, maintaining records, collecting rent, etc.

Poor response

The tenders, however, did not elicit much response and they had to be called more than once, the officials said.

Since there were very few participants who quoted lesser than the expected lease rent, BMTC had no option but to allot the premises on lease.

Extremely low price

A senior executive with a leading real estate firm said that he was shocked to learn that such low prices had been quoted for Koramangala, Jayanagar and Vijayanagar, which should have fetched at least Rs. 50 per sq ft. In other places, the spaces should have been rented out for at least Rs. 30 sq ft, he said.

Market rate

The executive's comments were based on the prevailing market rate for commercial spaces in those locations vis-à-vis available bulk commercial space.

The revenue yield, that is about Rs. 2.77 crore a month, is less than 10 per cent and is very low, he said.

Design flaw?

T. Venkatesh Babu, strategist with another leading real estate company, said that prima facie it appeared that TTMCs suffered from design flaw.

Any mall with less than 1.5 lakh sq ft is not doing well, he said citing the example of several malls on Brigade Road and Cunningham Road.

BMTC should have designed larger TTMCs to house hypermarts or destination malls on the lines of the Mantri Square in Malleswaram. Any such space would have fetched at least Rs. 60 per sq ft, he said.

The corporation should have known the potential of these places by inviting preliminary bids before beginning the construction.

It should have built the structures to suit the bidder's preferences, Mr. Babu said.

The design does not suit retail space, which requires provision for escalators and exclusive entries (other than through bus station).

‘Unnecessary'

Mr. Babu said that BMTC would have been in a better position by not building these vast structures.

The construction cost of commercial space would have been around Rs. 378 crore at a rate of Rs. 1,800 per sq ft.

BMTC would have saved this amount if it did not build this space.

A major portion of loan EMI, that is Rs. 40 crore, to be paid from its pocket, would have fetched handsome interest, if it was kept in fixed deposit, he said.