Mumbai/Bangalore: To generate funds from its realty assets, the operator of Mumbai’s airport said on Wednesday that it has leased a plot of land to Oasis Realty Pvt. Ltd for 580 crore.

The lease is part of an overall development of a 22 million sq. ft commercial business complex called GVK SkyCity, which will be built over a period of 10 years.

Mumbai International Airport Pvt. Ltd (MIAL), which is promoted by a GVK Group-led consortium, said the leased land has a potential for commercial development of 1.1166 million sq. ft.

The transaction has been finalized for 580 crore at the rate of about 5,000 per sq. ft of built-up area, the firm said.

Taking the Oasis Realty deal as the benchmark, the GVK Group may earn at least 10,000 crore for 22 million sq. ft of land around the airport, real estate consultants say.

“GVK SkyCity would be developed in 7-10 years. In this year, at least two million sq. ft of land would be developed," said G.V. Sanjay Reddy, vice-chairman of GVK Power and Infrastructure Ltd. “We are trying to develop another BKC."

BKC refers to Bandra-Kurla Complex, a commercial complex in the suburbs of Mumbai built to decongest South Mumbai.

Architect firm HOK has been hired to develop GVK SkyCity, Reddy said, which will have hotels, serviced apartments, convention centres, entertainment centres, and retail and office spaces.

The first phase of GVK SkyCity will be developed over 12 million sq. ft, said A. Issac George, director and chief financial officer of the GVK Group. “We were waiting the (business) cycle to turn up," he said.

MIAL, which has a debt of around 8,000 crore, hasn’t yet decided how to use the money from the lease, George said.

To be sure, rival GMR Group had landed into trouble while monetizing the land at Delhi airport.

In 2013, the government’s public accounts committee, headed by the Bharatiya Janata Party’s Murli Manohar Joshi, vetted a special audit on the matter of the Delhi airport operator’s subsidiaries that was ordered after a report by the Comptroller and Auditor General of India (CAG).

CAG, in a report tabled in Parliament in 2012, had said the civil aviation ministry allowed Delhi International Airport Pvt. Ltd (DIAL) “post-contractual benefits (that) violated the tendering process by which the joint venture partner was selected". DIAL and the government have denied the charges.

The government’s auditor has also highlighted “undue benefit" to the tune of at least 5,887 crore given by the aviation ministry to MIAL in 2013.

In a draft report, CAG emphasizes the cosy relationship between the ministry and MIAL during the ongoing modernization of the airport that started in 2006.

“The civil aviation ministry and the Airports Authority of India failed to monitor the project, effectively leading to undue benefit to the private concessionaire while the project kept getting delayed," it said in a report titled Draft Performance Audit Report on Implementation of Public Private Partnership Project in Chhatrapati Shivaji International Airport.

Reddy of the GVK Group declined to comment on the matter.

“We are sharing the revenue with the government even in leasing the land," he said, without elaborating.

Reddy also did not comment on potential earnings by monetizing the airport land.

The transaction has been closed at a phenomenally good price because it’s leased out and not freehold land, according to Anuj Puri, chairman and country head of Jones Lang LaSalle (JLL) India, a property advisory.

“The developer can do hospitality along with a little bit of retail on the land parcel," Puri said. “The next transaction should happen only in three-four months time."

JLL is advising GVK on these transactions.

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