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The Cabinet has approved a proposal to redevelop seven residential colonies in New Delhi. One of the biggest beneficiaries of this move will be State-run NBCC.
Out of a total expenditure of close to ₹32,000 crore, NBCC has won orders totalling ₹25,000 crore. Speaking to Bloomberg TV India, NBCC CMD Anoop Kumar Mittal said the company will make gains from these projects from 2017, when property sale starts.
What are the benefits you see from the scheme?
The government has decided to redevelop seven colonies in New Delhi. All these are government employees’ colonies located in Sarojini Nagar, Netaji Nagar, Nauroji Nagar, Tyagraj Nagar, Srinivaspuri, Kasturba Nagar and Mohammadpur. The construction cost for all these colonies will be ₹32,000 crore. Out of that NBCC will execute ₹25,000 crore worth of works and the Central Public Works Department (CPWD) will execute the remaining projects, which are smaller in size. NBCC will execute the Nauroji Nagar, Sarojini Nagar and Netaji Nagar projects.
The model followed here is the government will not invest any money and there will not be any budgetary support for the construction. NBCC will generate this money (₹32,000 crore) by selling a part of the property in Sarojini Nagar and Nauroji Nagar.
First, NBCC’s business is for ₹25,000 crore, on which we will get 8 per cent project management charges. Next , when we sell the projects worth ₹32,000 crore, we will get 1 per cent marketing charges per property.
And the third is we will invest some money initially and that is the seed money on which we will get 12 per cent interest. So these are the three financial components for NBCC. We will take five years to complete these projects. They will be implemented with the latest technology approved by the government and suggested by NBCC. Most of the projects will be on a design-and-build concept so that good companies can participate, the construction time is reduced and quality improves.
What’s the equity investment in these projects?
The upper limit is ₹1,500 crore. But I think ₹300 crore is enough as initial money because after four-five months we will start selling the properties. And then the money will start flowing into the project.
Will you have to raise debt?
No debt will be required.
Will you auction the land from these projects to private players?
No, it’s not like that. We will not sell land. We will sell the built-up properties. It means we will construct offices and residential units and part of the offices will be sold in the market to generate the money. So there will be no sale of land. The money collected from the sale will be used for the construction.
What is NBCC’s construction order book?
If I include these projects of government colonies worth ₹25,000 crore, NBCC’s outstanding order book should be in the range of ₹65,000 crore.
When are the revenues from these redevelopment projects likely to kick in?
Actual revenue flow from house booking will start flowing from next financial year. In the next seven-nine months, we will require time for drawing, design, approval from different authorities and vacating houses which are already there. In this financial year, we are expecting some revenue from sale of properties.
The Cabinet had earlier approved the sale of 51 per cent in another PSU — Hindustan Steel Works Construction Ltd — to NBCC for ₹35.7 crore. What’s the status?
The government has already approved the proposal. Now the company is in the process of getting approval from its board and Ministry of Corporate Affairs. By the end of December, HSCL will come under the fold of NBCC. The exercise is over from the government side and now it is between the two companies. We will pay ₹35 crore to the government for the equity and ₹100 crore to HSCL.
What’s the status of the monetisation project of Air India?
Last year, we signed an agreement with Air India. There hasn’t been any progress. After the new CMD joined Air India, we have revived our discussions. Hopefully, you will see one-two projects will start moving from the next quarter.
NBCC also has large swathes of land bank. What’s the plan on that front?
We have about 180-200 acres of land across the nation. In seven-eight locations, real estate ventures and construction activities are in progress and we are selling the properties. In FY17, we are planning to start work in some more projects.
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