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Krrish has paid only 10 % of lease for prime Fort property, admits Govt.
The Government on Friday conceded that M/s Krrish Group India has only made an initial deposit of Rs. 499.5 million or 10 per cent of the total lease premium for the Transworks House property in Colombo Fort.
Nimal Siripala de Silva, Leader of the House in response to a question raised by Opposition Leader Ranil Wickremesinghe said as a follow up action after making the initial deposit, the Urban Development Authority (UDA) has taken steps to vest the Heritage building site to seek the final approval to sign the lease agreement.
The Krrish billboard canvassing clients
The move came as the Krrish Group which was already operating an office from the World Trade Centre in Colombo started canvassing for clients offering apartments for Rs. 90 million on what they called “directors’ discounts.” It wanted deposits made to make the reservations.
In a statement in Parliament on Tuesday Mr. Wickremesinghe said the investor Krrish Group had agreed to pay 20% of the lease premium of Rs. 5 billion in accordance with the Cabinet decision, i.e. Rs 1 billion within seven days of setting up the Sri Lankan Company.
He questioned whether the 80% (i.e. Rs. 4 billion) balance payment would be remitted as per the agreement. He said the company was bound to make this payment on signing the agreement.
He also noted that the proposed project would cost US$ 450 to $ 500 million in addition to the lease rental of Rs. 5 billion.
He asked how Krrish Group was selected and what the criteria were for awarding the project. He further noted that there were public complaints that prime property in Colombo was given on 99 year leases without advertising through the media.
In his response Minister Nimal Siripala de Silva said “The Transworks House Property at Colombo Fort remained undeveloped for many years due to encumbrances and vulnerability to security threats that prevailed over the years. The efforts made by the UDA to develop the property jointly with the Central Bank of Sri Lanka in the recent past did not materialize.
A part of the site where the former Public Works Department building is located has to be preserved to secure its archaeological value. The portion of the land occupied by the power substation cannot become part of the development. These two portions of land are not vested with the UDA yet. Therefore the UDA was compelled to look for an investor who could make a proposal to develop the entire land parcel with a prior understanding about such limitations. In this backdrop, the UDA entertained an unsolicited proposal received as a response to the UDA web advertisement as the land was not yet available for tenders to be called through the media.
M/s Krrish Group India expressed its willingness to undertake the project in the entire land excluding the power substation site and incorporated a local company called Krrish Transworks Colombo Ltd., to undertake the project. Initially the UDA entered into a Memorandum of Understanding with the Krrish Group to formulate the project. Cabinet approval referred in the question was obtained to enter into a Lease agreement subject to fulfillment of certain conditions with necessary statutory approvals.
The Company has initially deposited a sum of Rs. 499.5 million being 10% of the total lease premium as a commitment fee on 14/9/2012. As a follow up action, UDA has taken steps to vest the Heritage building site in order to seek the final approval to sign the lease agreement.
Since the lease agreement has not been signed yet, the balance lease consideration has not been recovered by the UDA.
The process of inviting proposals has been explained in the Cabinet Paper. The UDA’s intention was to give an opportunity to all local and international investors to make their proposals to the said property.
The offer made by the Krrish Group for the above property was evaluated by the UDA. In addition to that the BOI has also recognized this project as a strategic development project.
The development proposal submitted for the site is for a mixed development project. The mixed development contains shopping arcades, retails shops, office space, hotels as well as apartments. Zoning for Colombo Fort as per UDA Development plan permits all the above uses.
The Krrish Group has diversified business which includes distilleries and real estate developments. Searches carried out through KPMG Sri Lanka (Chartered Accountants M/s Klynveld Peat Marwick Goerdeler), revealed that the Krrish Group is involved with various real estate projects in North India under various entities within the group, including JBPL Realty Nirman.”
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