Vijay Mallya case: Lenders fail to find buyers for Kingfisher House

MUMBAI: Lenders led by State Bank of India failed to find buyers on Thursday for the Mumbai headquarters of Kingfisher Airlines at an auction as they look to sell assets pledged by Vijay Mallya in return for loans to his grounded carrier. There were no bidders for the 17,000 square foot property, which had a reserve price of Rs 150 crore, amid a sluggish real estate market and in a location near the airport where there is little demand for office space.

As for the hotel industry, there’s already a glut of rooms in the area. The banks, which are expected to start the process for another auction, took possession of Kingfisher House in February last year. The e-auction was conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002.

The expectation of the lenders was too high, said a consultant specialising in office transactions.

"Looks like SBI set the reserve price based on their recovery expectations rather than how much the market would offer in the current scenario or even in normal conditions," the person said.

Given that the property was being sold to recover dues, the market had expected the reserve price to be much less.

"The total carpet size of the property is approximately 17,000 sq ft and even with 50% loading, the plot would have allowed around 25,000 sq ft new development," said a leading property consultant.

"The current market would value this development potential at a maximum price of Rs 48 crore, not beyond that."

The three-storey building is adjacent to the runway and falls under the airport funnel zone, which means it has to meet stringent height restrictions. The 17-lender group is engaged in a bitter battle with Mallya to recover its dues.

In November last year, bankers led by SBI had sought bids for movable assets — primarily vehicles and assets related to the airline business — from prospective buyers.

Mallya’s villa in Goa is under dispute as United Spirits has said it has been a tenant there since 2005 and therefore the banks cannot sell this without its approval.