Slum development grounds GVK's Mumbai airport plans

Realty plans hit roadblock; delay could hit modernisation

GVK-led Mumbai International Airport Limited (MIAL)'s realty plans have hit a roadblock - the interim airport modernisation plan approved by the Maharashtra government excludes slum pockets on 204 acres from planning and development. This could hit the airport's modernisation, as earlier, it was thought revenue from real estate development would be a source of funds for the project.

The plan to resettle 80,000 slums on the airport-owned land is also in jeopardy, owing to lack of a clear rehabilitation policy, as well as a dispute between MIAL and developer Housing Development and Infrastructure Limited (HDIL). MIAL has terminated its contract with HDIL, alleging the developer failed to meet the 2011 deadline for slum clearance and settlement. MIAL had planned to use the vacated land for both aeronautical, as well as non-aeronautical purposes.

However, HDIL hasn't accepted the termination notice. It had claimed the notice has "unsubstantiated charges" and said it would contest MIAL's decision.

MIAL did not respond to a query (sent last week) seeking comment. A senior government official said, "The HDIL-MIAL deal is not a tripartite deal involving the state." He added now, the priority was to complete the survey to identify eligible slum dwellers.

MIAL is operating the airport on a 30-year lease from the Airports Authority of India. The investment for modernisation of the airport is estimated at Rs 12,000 crore.

The airport-owned land covers 1,981 acres, including the 204 acres that weren't included in the development plan. Runways, terminal buildings, aircraft hangars, etc, account for about 1,169 acres, or about 58 per cent of the land. About 308 acres (15.58 per cent) of the land is encroached, while about seven per cent is vacant or undeveloped. The entire slum land wouldn't be available for real estate. The area on the eastern fringe of the airport, in the Kurla region, is in the flight path.

Large pockets of slums and villages near the international terminal, which abut onto plots earmarked for commercial development, have also been excluded from the development plan. Despite subdued market conditions, commercial properties in the area have a saleable value of Rs 10,000-14,000 per sq ft, while monthly lease rentals stand at Rs 100-140 a sq ft.

Last month, the state government had approved an interim development plan prepared by the Mumbai Metropolitan Region Development Authority. The plan outlined the road map for proposed aeronautical and non-aeronautical use, as well as infrastructure development. It proposed doubling the land for commercial, non-aeronautical purposes to 133 acres, across three zones. The land selected for commercial development included plots under MIAL's possession, as well as those occupied by utilities and other agencies.

"It is an interim plan. At the moment, we haven't decided how the land under encroachment would be developed. Unless there is a consensus on the issue, the plan would remain only on paper," said a senior government official.

The government is yet to complete a survey of the slum dwellers it proposes to shift to new apartments. Therefore, though HDIL had constructed about 20,000 tenements in the Kurla and Bhandup areas, slum dwellers residing on airport-owned land couldn't be shifted.

The official quoted earlier indicated the government was considering in situ rehabilitation of slum dwellers from areas excluded from the plan. If the rehabilitation is in situ, slum dwellers wouldn't have to be shifted to another location.

What are the options for MIAL?

"Deposits and lease income from real estate development is a key source of funds for the airport development. Any shortfall in this would have to be made good by way of additional debt, equity, (airport) development fee and user development fee. An increase in user charges may hurt traffic at Mumbai airport. Airports Authority of India would lose the revenue share it could have accrued from real estate lease income, while the government would lose taxes on this," says Amber Dubey, partner and head (aerospace and defence), KPMG India.

Banks are reluctant to provide fresh loans to the airport project.MIAL had hoped to raise about Rs 1,000 crore in deposits from real estate development by March 2013. It had identified plots in front of the domestic and international terminals, as well as in the Airports Authority of India colony. However, it was unable to kick-start the process due to lack of approvals, delays in shifting utilities and continued use of land due to airport works. The sharp fall in the absorption of office space in Mumbai in the quarter ended March has worsened the situation for MIAL.