Air India inks pact with NBCC for monetisation of its surplus land assets

Indian national carrier Air India Ltd has inked a memorandum of understanding (MoU) with National Buildings Construction Corporation Ltd (NBCC) for monetisation of its surplus land assets, according to a press statement.

NBCC signed a non-binding, non-exclusive agreement with Air India to develop Air India’s real estate in various locations on a joint venture basis. Each land asset will be individually evaluated for a particular mode of monetisation process.

Air India’s total surplus land assets are estimated at nearly 8 million sq ft spread across the country.

“Air India had 106 properties in the country out of which some were on lease basis and many were lying idle. Therefore, this agreement to develop and redevelop some Air India properties is an attempt to monetise to the tune of Rs 5,000 crore over a period of 10 years,” Air India chief Rohit Nandan said.

NBCC has a track record of successful project delivery and holds the status of being the default consultant for construction projects in various ministries such as defence and home affairs.

Cash-crippled national carrier Air India has been trying to divest its surplus real estate assets to pay down its debts for over two years.

Two years ago it had set the target of realising Rs 5,000 crore by selling assets worth around Rs 500 crore each year over the next decade.

It had also called for bids to appoint consultants for property monetisation in India and abroad and later engaged property consultant DTZ for the task.

Although Air India’s prized Nariman Point commercial office building is not part of this proposed divestment, it includes various other assets.

The airline has reduced both its operational and net loss over the last two fiscals but it is still far from coming out of the red.

The MoU with NBCC provides for three models of development of properties. It includes a plan where Air India's stake in the project will be based on value of the asset while money to develop it would come from NBCC and the sale proceeds will be shared between the two.

In the other structure, NBCC shall pay Air India a portion of the value of the land as upfront money. NBCC's interest in the project would be the project cost and upfront money paid to Air India. The sale proceeds would be shared by NBCC and Air India in the ratio of partnership interest.

In the third model, NBCC shall construct the project on behalf of Air India and the development cost will be incurred by NBCC and it will charge fixed internal rate of return (IRR) on the project on its investment.

(Edited by Joby Puthuparampil Johnson)

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