The company signed an MoU with the Special Area Development Authority, Gwalior, to carry out the project under public-private-partnership model, the company said in a statement.

As per the MoU, the realty firm would set up a Hi Tech city over an area of 2,000 acres, comprising 25,000 housing units.

The company has already acquired 375 acres for creating housing for the low and mid-income people.

Around 5,000 houses would be provided in this project and the developments work would be commissioned by October this year.

It is currently developing three new projects in Gwalior, consisting of residential, a shopping mall cum multiplex and commercial spaces.

ADAG insiders told that Reliance Entertainment was keen on the property, considering its popularity and location. Essel World is one of the first initiatives to set up an amusement part in Mumbai.

Essel World is touted as the first and largest amusement theme parks in India with an area of 64 acres. The move is in sync with the younger Ambani’s entertainment blue-print of creating entertainment zones across the country. According to sources, the deal is valued anywhere between Rs 300 crore and Rs 400 crore.

For the Essel Group, the decision to let go of the franchise stems from the fact that the amusement park faces tough competition from other recreational centres such as malls and multiplexes. While margins in the business are high, the capital expenditure to run an amusement park is also relatively high, as one has to re-invest at least half of that money into the business year on year.

Also, with Mr Chandra’s grand plan of setting up a 1000 acre entertainment and tourism-related SEZ gone kaput, with objection from the local inhabitants and political parties, the stand alone property is not part of the company’s larger entertainment vision.

In fact, in February 2008, Mr Chandra stated that they were open to withdraw from the project if the surrounding local community was not convinced of the project. There has been no real movement on that front. Leading the talks from the ADAG stable is Reliance Entertainment president Rajesh Sawhney. The acquisition of Essel World for Reliance Entertainment would translate into direct access to an entertainment zone, which could be refurbished and created into a larger brand, as opposed to hunting for land and developing an amusement park from scratch.

Also, in the recent past, the Essel Group has not really focused on the venture, and the returns from the amusement park have not been very significant. An ADAG insider close to deal said, “Negotiations are on, and now it is just a matter of valuation. If the economic value is good, the Essel Group would think twice about selling the property.”