The Cochin Port Trust’s (CPT) agreement to lease out 26 acres of prime
land at Bolgatty island to a private developer is fraught with
infirmities that can adversely impact the port’s absolute rights over
the land. The agreement allows the developer to pledge the leased land
with banks to raise money.
The lease deed signed between the CPT and the developer on July 26, 2011
allows the corporate house to seek loans or “create charge” against the
property from commercial banks and Central financial institutions.
“The lessee (the developer) shall not create any charge in respect of
the lease hold interest relating to the property described in the
schedule hereto vested in it as well as the building constructed on the
same without the prior written consent of the lessor, it being clearly
understood that such consent will not be granted, except in the case of
charges in favour of commercial banks and State and Central financial
institutions,” says Section 3 (e) of the lease document.
Lawyers point out that this clause in the agreement can lead to loss of
land for the port if the developer fails to repay its loans. Since the
land can be used as collateral security for loans, it is open to the
banks to attach this piece of property if the developer fails to repay
the loan. The 26 acres of waterfront property off Marine Drive cost
about Rs.500 crore in the open market. The port leased out this property
to the developer for Rs.71 crore.
Section 100 of the Transfer of Properties Act speaks about charge on immovable properties.
According to the Act, “where immovable property of one person is by act
of parties or operation of law made security for the payment of money to
another, and the transaction does not amount to a mortgage, the latter
person is said to have a charge on the property and all the provisions
hereinbefore contained which apply to a simple mortgage shall, so far as
may be, apply to such charge.”
Sub-leasing
Interestingly, the agreement also permits the unauthorised sub-leasing
of the land or buildings by the developer to third parties without even
informing the port. The CPT has offered to make post facto approvals of such unauthorised deals by the developer.
According to Section 3 (b) of the deed, “in the event of the lessee
effecting any such sub-lease without the prior consent in writing of the
lessor for the same, it shall be open to the lessor to approve of the
same if a request therefore is made, provided, the lessee pays the
lessor during the subsistence of such unauthorised assignment, transfer
or sub-lease additional amount as detailed below.”
In case of default of the measly Rs.1.05 lakh annual lease by the
developer, the CPT cannot even recover the amount as it has not insisted
on any security deposit though the lease deed states that the rent dues
shall be recovered from the deposit.
Section 1 (c) of the deed refers to a security deposit, but shockingly it says Rs. nil.
The lessee “has deposited with the lessor as security deposit towards
the rent an amount of Rs. nil (Rupees nil)... if the lessee defaults in
payment of the rent at anytime, necessary adjustments may be made by the
lessor from the amount in deposit and the lessee shall make up the
corresponding deficit in the deposit.”
http://www.thehindu.com/news/cities/Kochi/developer-can-pledge-kochi-ports-land-for-loans-says-lease-deed/article4624247.ece
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A real estate development project of 572 apartments worth over Rs.1,000
crore on the Bolgatty island off Marine Drive is awaiting final
environmental clearances. This is part of a Rs.380-crore investment deal
to build a convention centre and a hotel. But the real owner of the
land, the Cochin Port Trust (CPT), gets just Rs.71 crore for handing
over the land on a renewable 30-year lease.
The private developer proposes to build 572 “service apartments” on 10.9
hectares (a hectare is 2.47 acres) of the leased land. Serviced
apartments normally mean fully furnished apartments with cleaning,
laundry and other services on long-term rent to regular or occasional
clients. Here, the lease agreement between the CPT and the developer
refers to the possibilities of “assignment, transfer or sublease” of the
land or the buildings to be constructed by the developer.
Agreement
The agreement merely talks of an unspecified sub-lease levy to be paid
to the CPT for the land and buildings, which the developer is allowed to
sub-lease or transfer. And it is silent on whether the developer can do
outright sale of these “serviced apartments’’. While renewal of the
land lease is written into the agreement, it does not mention
profit-sharing by the developer with CPT or any share of the cost of
apartments to be “transferred or sub-leased”. The CPT refused to respond
to The Hindu’s queries.
A new three-bed room apartment in upcoming projects at Marine Drive
costs between Rs.1.5 crore to Rs.2 crore. So, the 572 apartments will be
worth over Rs.1,000 crore as they are coming up on land reclaimed from
Vembanad Lake, an ecologically fragile wetland (Ramsar site).
While justifying the reclamation during 2004-05, the CPT had contended
that no Coastal Regulation Zone (CRZ) clearance was required as the
total project cost was less than Rs.5 crore. Now, the developer is
investing Rs.380 crore to build a 217-room hotel, a 3,400-seat
convention centre, a 1,046-seat restaurant and a health club, apart from
572 apartments.
Market price for land
The CPT had initially sought clearance for the reclamation of land from
Vembanad Lake. And permission was given only for port-related
activities.
But the CPT is now handing over 26 acres of waterfront land on the
Bolgatty island for Rs.71 crore and an annual lease rent of Rs.1.05 lakh
with a 30 per cent rent hike every five years. Land can be bought at
Bolgatty in the open market only for Rs.20 lakh a cent (one-hundredth of
an acre), which will put the market price for the land at Rs.20 crore
an acre and thus the total land cost for the project at about Rs.500
crore.
The Kerala State Coastal Zone Management Authority had issued CRZ
clearance to the project even while its subcommittee had listed out the
CRZ violations.
Jacob Thomas, the former CPT chairman, had placed a proposal before the
Board of Trustees for the year 2004-05 for dredging and filling of land
for port area at Bolgatty as “more land had to be provided to the Dubai
Ports International for ICTT at Vallarpadam than earlier contemplated at
the time of the preparation of the Port-based Special Economic Zone.”
Land reclamation
Land reclamation was required “to provide additional land area adjacent
to Vallarpadam for the future development plans of CPT,’’ Mr. Thomas
wrote.
Later, in 2009, N. Ramachandran, the then CPT chairman sought permission
from the Union Ministry of Shipping “for long-term leasing of certain
plots of land which are not useful for port-related activities.” He had
listed seven sites owned by the port and not required for port-related
activities. Some of these plots of land were situated away from the port
and the Wellingdon Island.
In response to CPT chairman’s letter for “leasing out certain tracts of
land, which are far away from the Port for a period of 90 years so that
Cochin may not need budgetary support for capital dredging for deepening
and widening of the approach channel and berth basin of the ICTT,” R.
Srinivasa Naik, Director (Ports Operations) gave permission to lease out
these plots for 30 years.
But what was leased out was the land reclaimed solely to expand the port.
http://www.thehindu.com/news/cities/Kochi/port-gets-just-rs71-crore-for-a-deal-to-build-flats-worth-rs1000-crore/article4611223.ece
