Mumbai International Airport (MIAL), a GVK-led consortium that operates the Mumbai airport, has inked its first commercial property development deal worth Rs 580 crore for a 5.5-acre land parcel in GVK SkyCity, a mixed use development planned around Chattrapati Shivaji International Airport, with a Mumbai-based developer Oasis Realty.
This deal marks the start of monetisation of commercial real estate by the company, which forms part of its airport development plan. The parcel will have a potential of 1.166 million square feet of commercial development, GVK said.
The transaction, according to GVK, has been finalised at the rate of around Rs 106 crore per acre, and at about Rs 5,000 per square foot of built-up area.
Speaking to FE, Sanjay Reddy, managing director, MIAL said, "This is just the start of the monetisation process. There is a plan to have an overall commercial development of 22 million square feet, which will be undertaken in phases over a period of 10 years. This will include hotels, retail and commercial development". The company has set a target of about 2 million sq ft of monetisation by December 2014.
Real estate consultants have called the valuation for the deal as “fair”, adding that as commercial market recovers, valuation will go up from these levels. "The layout planned on the SkyCity project is quite exceptional and the valuation they have got seems right given that it would be much in line with the going rate around that area. As office market recovers, the price will only move up from here," Fali Poncha, director (land agency), Knight Frank India said.
In July 2013, GVK had called for request for qualification for development on four land parcels in Sahar and Andheri.
Of the 1,700 acres available for developing the airport and commercial amenities, 170 acres can be used by MIAL for commercial development. Of this, sources say, 105 acres, or about 60%, is still under slums, but the remaining 65 acres are available for development. The four parcels being monetised currently would account for the first 20-25 acres earmarked for commercial development.
Reddy clarified that the leasing agreement with Oasis is for the entire duration of OMDA. "We have 23 years remaining of the first 30 years and then another 30 years to go".
The funds garnered will be used to cross-subsidise the airport’s aeronautical revenues.