DIAL to lease land to clear debt

The Delhi International Airport Ltd (DIAL) consortium hopes to become debt-free after leasing out land at the airport to private parties for real estate development.

"We have a debt of Rs 5,000 crore (Rs 50 billion) on our books and will lease out land to clean our debt," said a GMR executive, who did not want to be identified.

"After the airport (terminal being developed) opens and various concerned parties come to us with offers, we will decide the rates," the executive added.

DIAL can lease around 250 acres to private players to build hotels and restaurants and develop a hospitality district.

A Mumbai-based banker, who was involved in GMR Infrastructure's (head of the consortium) fund-raising through a qualified institutional placement and did not want to be identified, said: "DIAL plans to sell the land in the hospitality district by September, after the airport terminal becomes operational in July."

DIAL had earlier planned to lease out 45 acres to be commercially developed in the first phase. It has so far leased out 21.8 acres to successful bidders.

In May 2007, DIAL formed a wholly-owned subsidiary called Delhi Aerotropolis Private Ltd, responsible for developing the entire infrastructure, including awarding the land on lease.

According to a 2007 estimate, the value of the life-time lease rentals for one acre of land was in the range of Rs 100 crore (Rs 1 billion). DIAL has the permission to lease out land for 60 years.

DIAL is a joint venture company led by the Bangalore-headquartered GMR Group, state-owned airport operator Airports Authority of India, Fraport and Malaysian Airport Holdings. It has invested Rs 11,700 crore (Rs 117 billion) in building the airport in the first phase, an escalation from the earlier estimate of Rs 8,975 crore (Rs 89.75 billion).

To meet the shortfall in revenue collection after the real estate market slumped, the civil aviation ministry allowed the collection of Airport Development Fee from March last year.

The collection permission is for 36 months, to collect an estimated Rs 1,827 crore (Rs 18.27 billion). Passengers flying out of the airport are charged Rs 200 and Rs 1,300, respectively, for domestic and international travel.