The unrealistic realty prices in the periphery of Chandigarh in the districts of Mohali and Panchkula have stopped many large players from making investments in the region.
Haryana Urban Development Authority had to defer the auction of an eight-acre plot earmarked for a five-star hotel in the city centre as only one bidder turned up on the day of auction. The authorities told that a quorum of three bidders was a must for the auction to take place.
Following the suit, the auction of 9.6 acre of land in Mohali by GMADA (Greater Mohali Area Development Authority) turned out to be a fiasco as the sole bidder Life Insurance Corporation of India got it for Rs 464.12 crore (Rs 4.64 billion). GMADA was in a Catch-22 situation as it had to acquire land for the Development of Mohali International airport. So making a virtue out of necessity, they sold it to the single bidder present there. The land was auctioned at Rs. 464.12 crore against the reserved price of Rs 464 crore (Rs 4.64 billion).
LIC offered Rs 1,00,025 per square yard against the reserved price of Rs 100,000 per square yard. The site fetched GMADA only Rs 12 lakh more than the reserved price of Rs 464 crore.
These are not the isolated cases. In the last annual convention of Federation of Restaurant and Hotel Industry many leading hospitality brands quoted the unaffordable land prices in Chandigarh and its periphery to set up a new venture.
The real estate industry observers believe that the reserve price of auction was too exorbitant.
The proposed Nano City project of Hotmail founder Sabeer Bhatia in district Panchkula did not take off because of the land cost. (Bhatia signed a memorandum of understanding with Haryana State Industrial and Infrastructure Corporation last year for the development of Nano City.)
"Who can start a viable project at Rs 1 lakh per square yard," says one of the potential investors.
According to Sarbajit Singh from Castle Estate, the reason for government auctions not doing well in Panchkula and Mohali was the unrealistic reserve price.
"The auction rates were quiet high in both the areas and that acted as a major deterrent for big parties not participating in the bidding process," said Singh
"Also the peripheral areas around Chandigarh heavily depend on investments by non-resident Indians and they showed keen interest towards residential property rather than commercial sector," added Singh.
According to Mangat Rai of Subash Mangat Properties, "The trend towards investments in commercial sector have declined in peripheries as the areas being auctioned are given premium piece tags. Also the political interference add up doubts in the minds of investors and make them think twice before investing heavily in big commercial projects."