New Delhi: The operator of New Delhi’s international airport has leased out 4.55 acres to a consortium of Aria Hotels and Hyatt for Rs200 crore to build a hotel, a top executive said.
With this, Delhi International Airport Ltd (DIAL)— owned by a consortium led by GMR Infrastructure Ltd—has mopped up about Rs900 crore in the first half of 2009 through realty transactions, Ashutosh Agarwala, chief finance officer, strategic finance, GMR Group, told Mint over the phone.
DIAL will now go slow on letting out further land at the airport till the real estate market improves, he said.
Securing funds: A file picture of New Delhi’s international airport. DIAL is to invest Rs8,975 crore to develop the airport in the first phase ending March, with part of the funding coming from property development. Hindustan Times
The airport operator had earmarked 45 acres that it intended to lease out to developers building hotels and conference centres. Of this, it had in March leased out five plots totalling around 17 acres to five hotel developers that included Accor Hotels, Bird Group-Dusit Thani Group and The Lemon Tree Hotel Co.
The lease agreement for these plots includes a fixed security deposit and an annual licence fee that would increase at least 5.5% every year for the lease duration of 57 years.
“We will be getting about Rs900 crore from this 21.8 acres (including 4.55 acres). From there on, continuing annual revenues would be Rs30 crore in the first year (2009-10) and (will) get escalated each year,” Agarwala said.
The hotels on the airport land were expected to be completed before New Delhi hosts the 2010 Commonwealth Games in October next year. However, one successful bidder said construction is yet to start and the firm is yet to hear from DIAL on road and electricity availability at the site. “We will start construction in two months,” he said, requesting neither he nor his firm be named. DIAL has said it is investing Rs8,975 crore to develop the airport in the first phase that ends in March, with a significant part of the funding coming from property development. But Agarwala said his firm was not in a hurry to lease out the remaining 23.2 acres; a decision on this would depend on how valuations in the realty market pickup.
A Mumbai-based analyst who tracks the firm said the decision could be based on its outlook that it has already secured enough funding with the airport development fee (ADF) levied on passengers travelling through the New Delhi airport. He declined to be named because he is not authorized to speak to the media.
ADF was allowed by the civil aviation ministry from March for 36 months to meet a Rs1,827 crore shortfall in airport modernization after as the real estate market slumped. Passengers flying out of the airport are charged Rs200 and Rs1,300, respectively, for domestic and international travel. But this fee, criticized by airline lobby group International Air Transport Association when it was imposed, may change if the airport operator is able secure enough grants to fund airport expansion through real estate funding.
“They (DIAL) have said not to link the ADF and land deal because they feel they will be able to swing it and keep both of them together,” the analyst said. “They will sell (the rest of the earmarked plots) in an opportune time and by that time they will be able to collect enough ADF.”
The ADF was allowed on several conditions and will soon be reviewed, according to a civil aviation ministry statement. “We will look at it in August,” a ministry official said on condition of anonymity, referring to the possibility of a fee reduction. Agarwala said there is no concern “as of now” with regard to the ADF.
Separately, on Friday, GMR said airports contributed 30% to its revenue for the fiscal ended 31 March, next only to its power business, which contributed 53.21%. In the preceding fiscal, airports contributed 20% to the revenue for the infrastructure company.
This, Agarwala said, was largely due to increased revenues from the new international airport in Hyderabad, which is operated by GMR Hyderabad International Airport Ltd and became operational last year. Also, revenues from Sabiha Gökçen Airport, Istanbul’s second airport, which GMR is developing with a Turkish consortium of Limak Inc. and Malaysia Airports Holding Bhd, added to its revenues. Hyderabad airport garnered Rs382 crore and the Istanbul airport fetched Rs270 crore. Indira Gandhi International Airport in Delhi contributed the biggest chunk of Rs507 crore in the fiscal gone by, up from Rs468 crore the previous year.
GMR Infrastructure’s stock slipped 6.61% at the Bombay Stock Exchange on Monday to close at Rs 159.75, on a day the benchmark Sensex index fell 2.9%.