A mega land monetisation plan through sale of surplus government and PSUs’ land is a part of Modi government’s ambitious National Monetisation Programme (NMP) to generate Rs 6 lakh crore of revenue over FY 2022-25. The success of this programme will depend upon how it leverages the opportunities and how it tackles the challenges.
The Land Monetisation Programme presents a huge opportunity. The Railways has about one lakh acres of vacant land. There is 32,000 acres of unused defence land following closure of military farms and abandoned airfields. About 20,000 acres of central salt pan land is also there for monetisation. Then, the CPSEs, mostly closed PSU units, have 5000 acres of land for monetisation purposes.
In order to ensure better monetisation of its land, the National Highway Authority of India (NHAI) is offering strategic land along the highways to tourist places. This land is being offered at concessional rates to the Housing Ministry and other departments for developing affordable housing, warehousing, and hotels. Real estate experts see it as a promising opportunity, spurring the growth of many new potential micro regions.
Air India’s real estate assets, including housing colonies, which were not part of the privatisation plan and were transferred to SPV- Air India Asset Holdings Limited (AIAHL) are also available for monetisation. It includes two major housing colonies, one at Vasant Vihar in Delhi and another at Kalina in Mumbai.
The government has created National Land Monetisation Corporation (NLMC) to unlock the potential by expediting the land monetisation process. This wholly owned government subsidiary has an initial authorised share capital of Rs 5000 crore and paid up share capital of Rs 150 crore. After considerable delay, the Centre has named a joint secretary in the Department of Public Enterprises as interim CEO of this SPV, along with the appointment of nominees to the board of the corporation. It will finalise the guidelines and criteria for selecting professionals from the private sector, specialising in real estate, investment banking, construction, and legal matters. Through NLMC, the government aims to initiate the process of monetising 3479 acres of surplus land identified by 9 PSUs, besides pushing other PSUs and government departments to prepare a list of assets for monetisation.
Later on, after land auctioning, it was left to the private developer to design, develop, and dispose. Currently, we are trying a bottom-up approach. Under this, experts are called in to analyse the demand in a region and the needs of the stakeholders. Initially, we included only users and stakeholders, but now developers and investors have also been added.”
Another mantra for successful land monetization is to do it in phases. Vishal Gupta of Deloitte informs that it is not only good for future land monetization but it even increases the market appetite. Says Amit Diwan of Hines, “Multi-phased monetization of land not only creates value for real estate developers and investors but also for the community.” According to him, partnering with government (PPP model) is another successful way of monetizing land as it takes care of the holding cost of land as well as the long and complex process of project clearances.
Amol Shimpi believes that government land is a good opportunity for investors. “Investors and strategic buyers have a fancy for financially stressed companies and stand-alone assets of sick PSU companies like buildings and land parcels.”
Welspun One Logistics, a part of the $2.7 billion Welspun Group, is actively exploring government land parcels for building Grade A warehousing facilities across key micro markets, especially in North India. Following its tie-up with the Tamil Nadu government, Welspun has recently entered into a MoU with the Haryana government with a development potential of about 5 million sq ft of warehousing space to be built over a period of 3-4 years, at an investment of Rs 1500 crore.
If done properly, speedily, and in an organised manner, monetization of thousands of acres of surplus government land can be a boon for not just the government but also for private developers and investors. Monetization of idle surplus land will push land supply in the market, ending artificially created scarcity, and, in turn, controlling land prices. This will have a sobering effect on the cost of real estate projects, thereby providing the much-needed boost to affordable housing – the flagship ‘Housing for All’ mission of the Modi government.