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Maharashtra government land meant for industry converted into posh complex in Mumbai

Land’s estimated value is Rs1,000 crore, but state continued to earn only Rs33,590 as annual rent on it until now

mumbai Updated: Jan 16, 2018 08:59 IST
Ketaki Ghoge
Ketaki Ghoge
Hindustan Times

In a textbook case of how government largesse with its leasehold properties benefits private interests at the cost of public exchequer, a nine-acre plot in Mumbai’s suburban Kanjurmarg meant for industrial development was converted into an elite private commercial and residential complex over the last decade.

While the land was developed into an elite complex — five residential towers of 34-storeys and IT park, which has an estimated market value of more than Rs 1,000 crore — the state continued to earn only Rs 33,590 as annual rent on this until now.

That’s less than the rent charged for a two-bedroom flat in any of the residential towers on this land.

After being slammed by the CAG in its 2013 report and an aggressive follow up by State Legislature’s Public Accounts Committee in 2017, the district suburban collector ordered the lease holder, Jolly Board Limited (JBL) to pay up Rs 138 crore as arrears of lease rent since 1989.

The arrears have been charged on the basis of a 1992 order given by the then revenue minister in this case.

A JBL spokesperson said the matter is subjudice and they have got a stay on the order.

The suburban collector issued the order in November 2017. The lease owner JBL got a stay on this order on January 1, this year, as it moved in appeal against the order to the divisional commissioner.

``We have charged Rs 138 crore as lease arrears along with interest for this property. The tehsildar has been asked to collect 25 per cent of this amount from the lease owner until a decision is taken on the appeal,’’ said Dipendra Singh Kushwah, city suburban collector.

The decision to charge arrears was conveyed to the PAC through an action taken report, this month.

“We are of the opinion that there should be no dilution of the lease arrears by higher authorities. Our audit has shown gross negligence in the way government lands have been leased out and in this case we have raised several questions over loss of revenue to the state,’’ said BJP MLA and member of the PAC, Yogesh Sagar.

While it remains to be seen if these lease rent arrears will be paid, it is clear from the PAC audit that state earned only Rs 17.33 crore as `unearned income’ on this plot.

The state charged unearned income to regularise the violation of lease agreement by the lease owner when JBL entered into a third party agreement with Lodha Group to develop this land commercially.

The PAC audit and CAG report notes that the third party agreement to develop land commercially was signed by JBL in 2005, much before the state allowed for change in use to develop the plot or any third party agreement over transfer of land rights.

Both, the original lease hold owner JBL and developer of this plot, Lodha Group denied charges of ``violation and irregularity’’ and the implication that a breach had been committed.

The change of use from industrial to commercial and residential increased the value of this plot to more than Rs 1,000 crore (conservative estimate going by the scale of the project).

According to a 2009 draft red herring prospectus prepared by the Lodha Group, its proposed development projects with JBL on the Kanjurmarg would make way for 2.27 lakh square feet (residential) and 19.30 lakh square feet (commercial including both phases) of saleable area.

“While we have entered into a joint development agreement more than a decade ago with Lodha Developers, the same has been done again, in accordance with law, and no development has been undertaken in breach of the lease conditions,’’ said the statement by JBL.

“The joint development wherein we did the construction and they were the owners was undertaken after taking permission of the authorities and making payment of relevant unearned income,’’ said a spokesperson from Lodha Group in an email statement.

The statement also said JBL has both owned as well as leased land in that area and the developer started work on the leased land in 2008-09 well after all required permissions were taken by the lease owner. However, Lodha Group did not clarify what had been developed on the leased plot vis a vis the owned plot.

A JBL spokesperson said the IT park had been developed on land owned by them while the residential complex had been developed on the leased land.

First Published: Jan 16, 2018 00:09 IST