Auction points to Bombay slump

PUBLISHED : Wednesday, 26 February, 1997, 12:00am
UPDATED : Wednesday, 26 February, 1997, 12:00am

An auction of nine prime Bombay properties seized by tax authorities has flopped, with none of the lots attracting a single bid.

The properties included five at Nariman Point, the most elite area in the city's central business district.

Analysts said the outcome showed would-be buyers were expecting a further drop in Bombay real-estate values.

Most of the properties were seized in early 1995 when prices were much higher, making the reserve prices set at auction unattractive.

Commercial space in the Nariman Point area has fallen from 25,000 rupees (about HK$5,375) per square foot in early 1995 to about 17,000 to 18,000 rupees today, depending on the building.

Reserve prices set by the tax authorities have averaged 20,000 rupees per sq ft, considered far too high by buyers, who have been able to conclude deals at lower rates.

One of the properties, a 1,288 sq ft office on the 10th floor of Raheja Centre, carried a reserve price of 25.8 million rupees.

'My top offer for the premises would have been 22 million rupees,' one prospective buyer at the auction said.

The Bombay real estate slump has seen prices slide by 25 to 30 per cent in the past 18 months.

Ironically, the properties were seized because their values had allegedly been understated. Buyers and sellers often agree to understate a property's value to reduce stamp duty.

In cases where it suspects the value has been understated, the appropriate authority of the Income Tax Department can acquire the property and auction it.

Most of the nine properties in this month's auction were acquired before the threshold for pre-emptive acquisitions was raised from one million rupees to 7.5 million.