Cash-strapped BDA plans to mortgage sites for loan

The cash-strapped Bangalore Development Authority (BDA) is considering raising funds from banks by offering its sites as collateral.

The proposal is still in the initial stage and a final decision will be taken only after the BDA board committee approves it, top officials said.

The plan is to use unallotted and non-auctioned corner and intermediary sites as collateral and raise loans from nationalised or scheduled banks.

The proposal came up when the BDA was looking at ways to fund the Dr Shivaram Karanth Layout planned to be developed in North Bengaluru, according to sources.

“Corner sites are of high value and are an asset for the BDA. If we go for securitisation, instead of auction, the BDA will benefit in the long run,” a senior BDA official said.

He continued: “Bank loan interest rates are fixed while the site value will appreciate over time. Since many banks will be ready to provide loans to the BDA, this seems like a good option for the BDA.”

Another official, however, pointed out that safeguarding the land might be difficult for the BDA, considering the large number of encroachments on its properties.

“We already have a large number of encroachment cases in various courts. There is a high possibility that encroachers may occupy these non-auctioned sites and pull us into a legal battle. Hence, we are still studying the pros and cons of the proposal,” the official said.

Explaining the plan the BDA has chalked out to fund the layout, another official said they hoped to raise at least Rs 1,620 crore from the initial deposit once the applications for site allotment were accepted.

“We can begin development at the layout using this initial deposit. Once the allotment is completed, we can expect at least another Rs 3,000 crore. In case, we still fall short of funds, we may think of securitising the sites,” a BDA official said.

The BDA recently invited tenders for developing the housing layout.

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