Cash-strapped BDA plans to mortgage sites for loan

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The cash-strapped Bangalore Development Authority (BDA) plans to raise funds from banks by offering its sites as collateral.

The proposal is still in the initial stages and a final decision will only be made after approval by the BDA board committee, senior officials said.

The plan is to use unallocated, unauctioned corner and middle sites as collateral and raise loans from nationalized or scheduled banks.

The proposal came when the BDA was looking for ways to fund Dr. Shivaram Karanth Layout which was to be developed in North Bengaluru, sources say.

“Corner sites have great value and are an asset to BDA. If we go for securitization, instead of auctions, BDA will benefit in the long run,” a senior BDA official said.

He continued: “Interest rates on bank loans are fixed while the value of the site will appreciate over time. Since many banks will be willing to lend to BDA, this seems like a good option for BDA.

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

“We already have a large number of encroachment cases before various courts. There is a strong possibility that invaders will occupy these unauctioned sites and embroil us in a legal battle. Therefore, we are still studying the pros and cons of the proposal,” the official said.

Explaining the plan the BDA has drawn up to fund the development, another official said he hoped to collect at least Rs 1,620 crore from the initial deposit once applications for site allocations are accepted.

“We can start development at the layout level using this initial repository. Once the allocation is completed, we can expect at least another Rs 3,000 crore. In case we are still short of funds, we could think of securing the sites,” a BDA official said.

The BDA recently launched a call for tenders to develop the housing development.

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