The Rail Land Development Authority has awarded contracts for the development of multifunctional complexes (MFCs) at five stations — Cuttack, Dehra Dun, Jhansi, Katra and Nanded.

The authority is a statutory body established by the Ministry of Railways to generate non-tariff revenue from railway land.

Winning bid

The winning bid for Jhansi offered an upfront payment of Rs 7.83 crore, annual rental of Rs 50 lakh with escalation of 15 per cent every three years.

Mr Rituraj Verma, National Director – Retail Agency, Knight Frank India, consultant for the auctioning, said Mumbai's real estate developer, Sumer Group, and Future Group, were among the companies that participated. The net value from the lease rentals received for the stations was Rs 28 crore, about 20 per cent higher than pre-bid expectations.

The developers will also have to work on about ten per cent of the total developable area, about 200 square metres in most cases, in nine months to offer basic facilities.

The complexes will provide amenities such as shopping, food stalls and restaurants, book stalls, ATMs, pharmacies and budget hotels, besides parking.

Mr Anil Kumar Gupta, General Manager, Railway Infrastructure, told Business Line that the contracts were awarded on the basis of bidders offering a one-time lease premium and annual lease rent and the highest present value of all payments at a discounted rate of 15 per cent.

Location

The location of the station is, of course, paramount. In general, an upfront payment of Rs 5 crore would call for an annual lease rent of Rs 30-40 lakh.

The lease period for the railway land is for 45 years, he said.

Though bids were received for Ujjain, they were not considered as they were felt to be lower compared to its potential.

There were also some conditional bids that called for dismantling of quarters and improvement of access, which were set aside.

The Railways introduced the concept of MFC in 2009-10 for developing at a centralised complex at stations, besides upgrading the existing amenities in cities having tourist and religious importance.

In the first phase, 48 MFCs were taken up jointly with three railway PSUs — Indian Railway Construction Company, Rail India Technical and Economic Services and Rail Vikas Nigam Ltd, while Cuttack, Dehradun, Jhansi, Katra, Nanded and Ujjain were proposed for development through private developers. In all, 86 MFCs will be developed through private parties as part of the second phase announced in the 2010-11 Budget.

Investment

For the tie-ups with rail PSUs, Mr Gupta said the formula was for fixed profit sharing.

The investment, however, will be by the Government agencies and the 45-year lease period was also applicable to them.

On the extent of revenue the Railways was looking at, Mr Gupta said the project was more to offer better amenities to passengers without investment.

Of the 48 slotted in the first phase, 15-16 would be operational by March 31, 2011.

An analysis of about 25-30 sites indicated that 20 per cent would fetch over Rs 10 crore and an identical percentage between Rs 2.5 crore and Rs 10 crore.

The rest would be below Rs 2.5 crore each as upfront payment.

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