The mall, to come up at the Delhi airport, could cost around Rs600 crore to develop and earn the airport operator Rs200-250 crore in a one-time payment and Rs30 crore a year
New Delhi: DLF Ltd, Bharti Land Ltd, The Phoenix Mills Ltd, K. Raheja Corp. and Xander Group Inc. are in the race to build India’s first airport mall at the Indira Gandhi International Airport in Delhi.
The mall, at 2 million sq. ft, will be as big as six football fields, could cost around ₹ 600 crore to develop, and earn the operator of the airport, Delhi International Airport Pvt. Ltd (DIAL, owned by a consortium led by GMR Infrastructure Ltd) ₹ 200-250 crore in a one-time payment and ₹ 30 crore a year.
The mall will cater to passengers and also to residents of parts of Delhi and Gurgaon that abut the airport. It will be adjacent to the new hotels at the airport’s so-called Aerocity, overlooking National Highway 8.
The Delhi airport is the country’s largest airport by passenger traffic and a hub for Air India, Vistara and IndiGo.
A Delhi airport spokesman said a request for qualification (RFQ) for the integrated retail developments, spread over some 23 acres of land at Delhi airport, was issued on 5 November 2015. An RFQ helps shortlist entities qualified to build a project.
“The proposed integrated Retail Development is going through bidding process as per and in accordance with statutory requirements/provisions of OMDA (Operation, Management and Development Agreement) and with the approval of the DIAL board," he added.
Five companies have qualified: DLF, Bharti Land, Phoenix Mills, K. Raheja Corp. and Xander Group. Some of them run huge malls in several Indian cities.
The companies will now have to submit detailed bids by next month.
A spokesman for Inorbit Mall, a subsidiary of K. Raheja Corp., said: “Inorbit is looking at possibilities in NCR (National Capital Region). On this specific one, we do not want to comment."
Queries e-mailed to the other developers remained unanswered.
“India doesn’t have the mall of this scale yet," said Ashutosh Limaye, research head at property consultancy Jones Lang LaSalle’s India unit. “When one builds malls of such a scale it usually becomes a destination for people from all over. The size is such that it can accommodate everyone, so retailers do not want to miss out."
In the first phase of airport development, DIAL leased out 45 acres of land and raised ₹ 1,471 crore in upfront fees to fund the ₹ 13,000 crore airport modernization plan.
The plan had run into problems initially, as DIAL had asked for very steep upfront fee which would have led to a lower yearly rent, part of which has to be shared with state-owned Airports Authority of India (AAI).
For the mall, the developer needs to give an upfront lease rental of three years besides the lease rent for 50 years. The airport was leased to DIAL in 2006 for a 30-year period, extendable by another 30 years.
The hotels at Delhi airport were given out for about ₹ 2 crore an acre.
By that yardstick, the mall could fetch at least ₹ 200-250 crore in upfront cash and lease rentals of ₹ 30 crore a year.
The mall will “be a high-end upmarket mall destination with some of the world’s premium brands entering for the first time in India", said a person with knowledge of the subject who did not want to be named.
India’s retail market is expected to nearly double to $1 trillion by 2020 from $600 billion in 2015, driven by income growth, urbanization and attitudinal shifts, according to a study by Boston Consulting Group and Retailers Association of India.
The mall plan also highlights the increasingly expansive definition of what airport land can be used for. Robey Lal, a former AAI board member, said the principle so far has been use of land for aviation-related purposes.
Lal said this was on the basis of the AAI Act and that it was possible some changes had been made to it now.
“This sets the precedent for AAI land at other airports, earmarked for commercial use. It improves the prospects of more AAI airports becoming financially and economically viable," he added, referring to over 100 airports that AAI operates.
Lal said he would have liked to see DIAL leasing out its land for a hospital.
“The primary thrust should be on burns and trauma treatment, which is required in case of a mishap and will be a major contribution to community service."