Credit crunch hits efforts of railroads to lease surplus land

New Delhi: After failing to bid out even a single plot of land owned by the railways for commercial use, the Rail Land Development Authority (RLDA) is facing problems in three locations where it came close to leasing land to private developers.

In Visakhapatnam, Andhra Pradesh, a firm that has won the bid for a plot of land has forfeited the amount it paid to the railways as bid security because it can't go ahead with the purchase of the land, said a railway official who didn't want to be identified.
RLDA was set up in 2007 to help the railways monetize its surplus land, but the current credit crunch, that has hit the Real estate sector last year, is hurting such efforts.

The railway official said in two other places—Sarai Rohilla in Delhi and Gwalior in Madhya Pradesh—the successful bidders for the other two plots of land have sought several extensions on the date for making payments.

While refusing to name the companies that have won these bids, the official contended that they wouldn't be given extensions indefinitely. However, "forfeiting bid security is easy, but the market is bad. Everybody has liquidity problems," he said.

Another railway official confirmed that RLDA hasn't yet been able to bid out any land to private developers, who are hit by the current economic downturn. He, too, did not want to be identified.

"The story of the inability of RLDA to develop land parcels is the same story of the government of India to develop PPP (public-private partnership) projects. You go on perfecting the model so much that there is no market," said Akhileshwar Sahay of infrastructure consultancy Feedback Ventures Pvt. Ltd, which is a consultant to RLDA.
According to official data, as of 20 March, RLDA has either completed consultancy or invited bids for 11 plots measuring a combined 75.39ha including two plots of land in Visakhapatnam and one each in Gwalior and Delhi.
Consultancy on 51 other plots is currently in progress.

RLDA was expected to help the railways generate a significant portion of its capital expenditure in the coming years. In his budget speech of February 2008, railway minister Lalu Prasad had said the railways expected the private sector to contribute nearly Rs1 trillion—around 40% of the investments it planned for the next five years—through PPPs.
However, many of these plans to include private partners have been derailed by procedural delays.