The residential property market may be stagnant, but the demand for office space is still strong if a lease transaction in Bandra-Kurla Complex (BKC) is any indication.

The deal, touted as the highest ever for a commercial property in terms of annual rent, will fetch the owner, Parinee Developers , almost Rs 70 crore a year from the Sahara Group. TOI has learnt that the agreement is expected to be sealed by next week. 

According to real estate sources, the UP-based Sahara Group will take over 2.5 lakh sq ft space in Parinee Cresenzo, a 20-storey commercial project by Parinee Developers, co-owners of the Kochi Tuskers IPL team. The two parties reportedly negotiated the deal for a lease amount of Rs 225 a sq ft, which works out to an annual rent of close to Rs 70 crore. "A few buildings in BKC command over Rs 375/sq ft. 

However, the Parinee-Sahara deal is the highest in terms of the total annual rent," said a property tracker. "Given a scenario in which the lease rental rates for ready-to-occupy premises in BKC are between Rs 300 and Rs 350 per sq ft, it looks like a good transaction." 

Parth Mehta, business development head of Parinee Developers, refused to comment on the deal. Industry sources said BKC was currently the "hotspot" for most corporates, MNCs and banks as compared to the rival commercial business districts of Lower Parel and Nariman Point-in the latter, lease rentals are currently between Rs 225 and Rs 250/sq ft on an average. "Nariman Point buildings can only offer offices ranging between 500 sq ft and 3,000 sq ft but clients who want a floor space in excess of one lakh sq ft find it readily available in BKC," they said. 

The Cresenzo building stands on a 2.2 acre plot which Parinee acquired from MMRDA ( Mumbai Metropolitan Region Development Authority) on an 80-year leasehold basis in July 2006 for Rs 536 crore. In 2008, the builder sold 2.2 lakh sq ft to Standard Chartered, for Rs 720 crore. About four months ago, BNP Paribas paid about Rs 375 per sq ft for 1.10 lakh sq ft space in BKC's Maker Maxcity Tower One, a cluster of high-end commercial buildings built by the Maker Group and Reliance Industries . 

The annual lease rent works out to almost Rs 50 crore. Automobile giant Volkswagan took on lease 50,000 sq ft space in Maker Maxcity at Rs 500 a sq ft. In 2007, the Gemological Institute of America signed a nine-year lease agreement with the Wadhwa group when it rented 1.06 lakh sq ft in the Trade Centre building in BKC for over Rs 40 crore annually. 

A month ago, Citibank India is believed to have bought for over Rs 1,000 crore (Rs 33,000/sq ft) a 3-lakh sq ft office space in a BKC building constructed by the Purnendu Chatterjee promoted-TCG Urban Infrastructure and New York-based realty firm Vornado Realty Trust. 

In 2007, the London-headquartered Barclays Bank paid a record-breaking rent of Rs 725 a sq ft per month for a 15,000-sq-ft office space in Worli's Cee-Jay House, whose landlord is aviation minister Praful Patel. It was the highest commercial rental deal in terms of per-square-foot in the country. 

Experts said there was hardly any demand in the commercial market in the last few years. "Developers preferred to construct residential apartments due to quick sales at the under-construction stage. Eight of out of 10 files submitted to the BMC for approval were residential. But with growing businesses, there is going to be a demand for quality commercial premises in the Central Business areas,'' they said. 

BOX: There are about 300 buildings in BKC, which have come up in phases since the mid-1980s. It was in 1977 that the state government decided to develop BKC into a commercial hub to decongest the overcrowded island city, especially the southern tip of Nariman Point. A government report said that the region, hemmed in by the Western Railway tracks to the west, the airport to the north, LBS Marg to the east and the Mahim Creek to the south, would probably furnish the best location for an alternative centre of business.