Logistics

Landside developments in airports provide operators to maximise revenue by utilising real estate

Anil Urs Bengaluru | Updated on February 11, 2021

Landside developments in existing airports provide operators to maximise their revenue by effectively utilising the real estate.

In 2019, the Centre allotted six airports to private operators to maximise the revenue, these were Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, and Mangalore. A further six more airports are now selected for privatisation - Amritsar, Varanasi, Bhubaneshwar, Trichy, Indore and Raipur.

According to Subhankar Mitra, Managing Director, Advisory Services at Colliers International India, “Here, the operator needs to understand the demand generated from the respective airport to develop real estate with the right model that can get maximum revenue with the highest and best use of the property.”

The operators need to focus more on non-aero revenue. Not only in the terminal but also understand the overall regional context of the airport by developing ancillary real estate i.e., logistic parks, smart warehousing, industry specific clusters like textile parks, film cities, institutes, healthcare.

“These developments should not just only be dependent upon the passenger traffic of the airport but also about inherent demand generated from the respective cities,” explained Mitra.

He added, “The authorities should adopt a more practical approach while searching for private operators. They need to share the risk equally with private partners by emphasising more on revenue share rather than upfront premium. More innovative models need to be developed with longer tenure. Additional lands for real estate development to increase non-aero revenue could be a catalyst for bidding by the operators.”

Urgency in unlocking real estate

The potential of India’s airport sector is largely unfulfilled. Through the expansion and modernisation of airports, the country can achieve tremendous growth in tourism, hospitality, leisure, recreation and many other services.

“The positive takeaway in today’s context would be the slowdown in the aviation sector has created a sense of urgency in unlocking the real estate potential of Airports in India. While some of the Airports are holding prime lands of the city, many of the others have the potential to open up new growth corridors in their respective city,” said Mitra.

According to him, the revenue from airport real estate is in the range of 25-40 per cent of total revenue for an airport. Sometimes the airport owner does a joint venture for such developments. Land at airports can also provide an additional advantage in the raising of funds for modernisation and upgrading an airport.

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Published on February 11, 2021
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