A year-and-a-half gone by but national carrier Air India’s land monetisation tie-up with NBCC India has seen little progress, as land use norms and expectations of returns pose a bottleneck.

The two had entered into an MoU in December 2014 to monetise Air India’s land. Under the MoU, the two companies had worked out three land development models. Each land asset had to be individually evaluated for a particular mode of monetisation process.

While the two have concluded a deal in Coimbatore and are soon expected to close transactions in Kolkata and Mauritius, prospective land parcels for monetisation remain in Mumbai, Hyderabad, Delhi, Chennai and Gurugram.

According to an NBCC official, though land has been identified, there seems to be no pressure on Air India. “Besides, it looks like an open-ended process with no deadline to conclude the transaction,” the official told BusinessLine .

‘Ministry’s norms’

However, a source in Air India denied allegations of going slow on the MoU. 

“The issue is that under the norms of the Ministry of Urban Development, the land planned to be developed can only be used for making a booking office or administrative offices,” the source said.

NBCC is expected to go for construction of residential or commercial properties, depending on the land use, and then sell units in the market. Construction costs will be borne by NBCC; hence land will be Air India’s equity while the construction cost will be NBCC’s equity.

Profit will be shared according to equity or on a project management basis, or Air India may pay NBCC some interest.

Another official said there are issues of how much fund NBCC was expecting to generate from the project.

Under its assets monetisation plan, debt-laden Air India has to mop up ₹5,000 crore over a 10-year period, with an annual target of ₹500 crore from fiscal year 2013, in order to narrow the gap in its revenue and expenditure.

This plan is critical for restoring profitability in the state-owned carrier.

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