Hotel developers shy away from DIAL’s plans

New Delhi: A year after it floated the proposal, the GMR Infastructure Ltd-led consortium upgrading the city’s international airport is finding it tough to locate suitors for the 45 acres it plans to lease out to developers of hotels and convention centres, with demand for the prime real estate waning.
The expected fall in land values has prompted at least one financial analyst to downgrade shares of GMR Infrastructure.
In May 2007, the land lease proposal for the same land parcel had seen raising at least Rs2,835 crore in refundable deposits for 28 years and a licence fee that would be determined through bidding for leasing out the land to realty and hospitality firms.
That proposal, however, ran into regulatory hurdles with the civil aviation ministry opposing the fund-raising plan as it was seen as a means to bypass nearly 46% of the airport’s revenues that Delhi International Airport Ltd, or DIAL, the company operating the airport, had promised to share with the state-run Airports Authority of India, or AAI.
GMR Infrastructure has nearly 250 acres at the airport and some 1,500 acres at the Hyderabad airport (also developed by a GMR-led consortium) for commercial development.
Being able to realize value from the land banks is key to raising money for airport modernization, given that other avenues such as increasing landing and navigation charges, and passenger fees have been opposed by the ministry, except in Hyderabad, where departing domestic passengers pay Rs375 while international passengers pay Rs1,000 each.
DIAL has tweaked the lease plans to accommodate both small and large hotel and realty firms
But between 2006, when the land lease plan was first mooted, and now, realty market dynamics have changed drastically with waning demand and soaring construction costs, as also reduced airline traffic at Indian airports as airlines pull back flights hit by steep fuel prices.
09/10/08 Tarun Shukla and Rahul Chandran/Livemint

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Categories: Airports Oct 2008