Too expensive? 4 reasons why there are no takers for Mallya's Goa villa

The auction to sell Vijay Mallya's villa in Goa  turned out to be a damp squib as State Bank of India failed to get any bidders for it at a reserve price of Rs 85.29 crore.

Here are the top reasons why the bank could have failed to attract bidders:

High price

Real estate developers and investors feel that the price quoted is too high given the current status of the property markets.

Property markets across the country including key markets such as Mumbai, national capital region (NCR) and Bengaluru are down since 2014 and developers expect the markets to pick up  only after 2017.

 

"Price is too high for a Goan property," said the chairman of Mumbai-based real estate company who didn't want to be quoted.

At a bid price of Rs 85.3 crore, it turns out be around Rs 6455 a sq ft. The villa has an area of 12,350 square  metres or 132,145 sq ft.

"Buyers may be expecting exorbitant discount to price. They expect second bid /tenders with a huge discount," said Ajay Jain, executive director and head of real estate group at Centrum Investment Banking.

Even prices in cities such as Mumbai have not risen in mid-single digits in the last three years, indicating a time correction, say investors.

Negative sentiment

According to developers and investors, buyer sentiment is still negative and would take couple of quarters to pick up.

"Investors and buyers are in no mood for big purchases as their previous investments are in bad shape. Second homes market is worst hit," said a chief executive of a real estate developer who did not want to be quoted.

Too much publicity

The CEO quoted earlier said the buyer of the house will get too much coverage in the  media due to the controversy surrounding mallya hence people are staying away from the villa. 

" People may like to stay away from the Mallya property due to his strong relationship across lenders, politician and bureaucrats," said Jain of Centrum.

Process of sale

Developers felt the sale process is too lengthy and involves a lot of documentation.

"The bidding should done by a auction house on location. They should remove the reserve price ," said the developer quoted earlier.