Impact on real estate of Govt’s National Monetisation Pipeline – The Financial Express

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Streamlining operational modalities, encouraging investor participation and facilitating commercial efficiency could ensure efficient and effective outcomes from the monetisation drive.

The NMP comes up as a proof that efficient utilisation of the assets can be done with the help of the private sector.

The National Monetisation Pipeline (NMP) has been created amid the unprecedented Covid situation by the Government of India to establish a medium-term pipeline along with a roadmap for “monetisation-ready” assets. It lists out the assets & its classes under the ministries of infrastructure. It is a timely step by the government to unlock the asset values & bring in investments across varied sectors. With the help of NMP, the volume of assets to be monetised & the potential value of the same will be more visible. This move clearly depicts the role of the infrastructure in boosting the overall economic growth, with a total indicative value of Rs 6 lakh crore over the period of 4 years, FY22-FY25.

Asset monetisation is critical to attract capital into the infrastructure sector. However, except for being just a funding mechanism, it must work as a complete strategy for bringing a change in the infrastructure creation, service, delivery & maintenance. It includes projects/ assets of the Central government line ministries and CPSEs in infrastructure sectors with high monetisation potential. The sectors include roads, ports, airports, railways, warehousing, gas & product pipeline, power generation, power transmission, mining, telecom, stadium, real estate and hospitality infrastructure.

Considering the same, the impact on real estate cannot be over looked. As per the report by Niti Aayog, the urban real estate assets have been estimated at a monetization potential of around 15000 cores. The Urban Real Estate Assets, which include the redevelopment of colonies along with development of residential / commercial units, is envisaged under the NMP. An estimated investment of Rs 32,276 crore for the redevelopment of 7 GPRA colonies in Delhi, which are located in Sarojini Nagar, Naoroji Nagar, Netaji Nagar, Sriniwaspuri, Thyagraj Nagar, Mohammadpur and Kasturba Nagar, have been identified.

Rs 15,000 crore for developing the residential/ commercial units on 240 acre land in Ghitorni (Delhi) has been identified. In this project, 8,000 units of GPRA and 3,000 units for migrant construction workers will be developed. Due to the commercial potential of the project, private sector participation is encouraged for development of the project.

The redevelopment of these projects will be done through a PPP-based model, cross subsidised through sale/ lease of commercial built up area. These projects envisage a mixed use of redevelopment of a vacant tract/ brownfield sites at prime locations in Delhi-NCR. The proposed projects are real estate projects which would entail development of residential accommodation & commercial spaces in prime areas through a self-funded mechanism. This will help in creating a dual impact on the sector. On the one hand, it will enhance the commercial & operational efficiency & on the other hand, will also ensure upfront/ periodic consideration to the authority / Ministry of Housing & Urban Affairs.

While moving from the urban real estate to the hospitality category for urban development, eight hotels of India Tourism Development Corporation (ITDC) have been recognised under the NMP. These hotels will be monetised through different routes like long-term leasing, divestment, long-term OMT (operate, maintain, and transfer) contract etc as per individual case. The eight hotels are Hotel Pondicherry, Puducherry; Hotel Kalinga, Bhubaneshwar; Hotel Ranchi, Ranchi; Hotel Nilachal, Puri; Hotel Anandpur Sahib, Rupnagar; Hotel Samrat, New Delhi; Hotel Ashok, New Delhi; and Hotel Jammu Ashok, Jammu. The government also aims to monetise warehousing assets worth Rs 28,900 crore and stadiums worth Rs 11,450 crore under the national monetisation pipeline.

As per experts, the NMP will prove to be a win-win situation for both the government as well as the private sector. It will inject efficiency in the system along with revenue generation. This will lead to a multiplier effect on the local economy to boost the sector & generate opportunities for employment. The pipeline leases the assets to private players on a long-term basis, with substantial rights, opening up new opportunities for investors in the infrastructure sector. The structured contractual partnerships between the government and private players via the NMP shall generate sustainable infrastructural funding by monetising core brownfield infrastructural assets, that is, assets where operational infrastructure has already been built. This gives an additional benefit to the developers with reduced risks for the projects. This will act as an enabler between both the sectors, to work with their respective areas of competence for mutual benefit. Moreover, the liberty to common individuals, who will be able to participate in asset class of investing through new models such as Infrastructure Investment Trusts and Real Estate Investment Trusts shall add on to a new way of function of real estate.

However, concerns have also been raised with respect to the valuation models & lack of revenue streams identification in various assets. This can be considered as a challenge to attract participation & might raise concerns among the stakeholders. A dispute resolution mechanism needs to be built in the roadmap to avoid any further challenges. Streamlining operational modalities, encouraging investor participation and facilitating commercial efficiency could ensure efficient and effective outcomes from the monetisation drive.

The NMP comes up as a proof that the assets might have been built by the government, but efficient utilisation of these assets can be done with the help of private sector. This creates a huge opportunity for various sectors, including real estate, for putting across the potential in boosting the economic growth. This is likely to take the FDI & the domestic capital flow on a higher side. The true essence of the National Monetisation Pipeline will be realised in smooth execution & effective implementation. The government looks determined with monthly & quarterly review mechanisms to actualise the said targets. A mix of fair risk & reward allocation along with efficiency in the process is sure to make it a success. If taken in the right direction & complete focus, this might be a great push for the nation’s growth. The blend of public and private sector can prove to be the game changer!

(By Aman Trehan, Executive Director, Trehan Iris)mail logo

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