Airport land may fuel real estate growth

The Centre had initiated a proposal in 2017 for amending the Airports Authority of India (AAI) Act, 1994, for liberalising land-use at airports owned by AAI as mentioned in the National Civil Aviation Policy (NCAP) 2016.

Anu Sharma
Updated10 Feb 2023
Amendment in the AAI Act will allow usage of land around airports for non-aviation purposes—for instance, an IT company with no exposure to aviation can also open its office there. (Mint)
Amendment in the AAI Act will allow usage of land around airports for non-aviation purposes—for instance, an IT company with no exposure to aviation can also open its office there. (Mint)

New Delhi: Smaller towns and cities across the country could see a boom in property investments with the Airports Authority of India (AAI) working on a plan to offer land for development around some 50 airports.

AAI has about 45,000 acres of land around these airports and a certain portion of these would be leased to developers for building hotels, offices, restaurants and shopping malls.

Sources in the know said the state-run airport operator has completed the paperwork for land mutation at over 50 airports and is also digitising this as part of its long-term plan for increasing non-aeronautical revenue through land monetisation.

“There are airports such as Udaipur, Indore, Raipur, Kushinagar among many others which have potential for land development on the city side. For now, we are identifying the airports and also in the process to amend the AAI Act, which is crucial for this plan to achieve fruition,” a second official said.

Real estate consultant Anarock said last year that cities such as Baroda, Badaun, Indore, Nagpur and Udaipur would see new real estate investments in 2023.

Amendment in the AAI Act will allow usage of land around airports for non-aviation purposes—for instance, an IT company with no exposure to aviation can also open its office there. Current rules allow businesses involved in aviation, including hotels, to use land around airports.

The Centre had initiated a proposal in 2017 for amending the Airports Authority of India (AAI) Act, 1994, for liberalising land-use at airports owned by AAI as mentioned in the National Civil Aviation Policy (NCAP) 2016.

However, the plan did not see the light of the day. Mint reported on 17 January that the government has revived that proposal.

AAI has 55,000-60,000 acres of land across more than 150 locations, including airports and airstrips and the proposal for generating revenue via leasing of land assets has gained traction as the airport company tries to expand its revenue generation potential.

AAI has been seeking to increase its non-aeronautical revenue gradually over the last five years. The share has increased to 18.2% of total revenue in 2020-2021 from 10.41% in 2016-2017.

In contrast, non-aeronautical revenue makes up 40-50% of total revenue for private airports.

“While large land holdings, network of airports across the country, expertise in providing air navigation services, consistent profitability and financial resources, and experienced manpower are the key strengths of AAI, low share of non-aeronautical revenue, low growth of cargo business, skilled manpower shortage and training, limited focus on marketing are its key weaknesses,” AAI said in its annual report for FY20.

The attempt to develop land near airports in tier-2 and 3 citiesis in line with the rise in air traffic to and from these destinations on account of increase in income levels, expansion of corporate houses beyond metro cities and migration of young people for education and work, among other reasons, an analyst said.

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