National Monetisation Pipeline: Urban real estate, warehousing and stadiums in Rs 6 lakh crore programme

Finance Minister Nirmala Sitharaman on August 23 announced a Rs 6 lakh crore National Monetisation Pipeline (NMP) that will look to unlock value in infrastructure assets across sectors. Besides roads, railways, and warehousing assets worth Rs 28,900 crore, stadiums worth Rs 11,450 crore and urban real estate of Rs 15,000 crore are put up for monetisation.

Monetising two national stadiums, including the Jawaharlal Nehru Stadium in New Delhi, and an equal number of regional centres (at Bengaluru and Zirakpur) is estimated to yield Rs 11,450 crore.

Redevelopment of seven residential colonies in Delhi, including those at Sarojini Nagar and Nauroji Nagaras as well as development of residential/ commercial units on 240 acres of land in Ghitorni in Delhi has also been identified to garner Rs 15,000 crore.

Close to Rs 29,000 crore is estimated from monetising warehouses.

The government plans to monetise all assets through direct contractual instruments such as public-private partnership (PPP) concessions as well as capital market instruments such as Infrastructure Investment Trusts (InvIT). InvITs will help the retail investors to participate and gain from the India growth story.

“All-in-all, NMP is a timely move and looks to be a good step towards the government’s vision of reducing its focus from the non-core businesses and improve its fiscal position,” said Anuj Puri, chairman – ANAROCK Property Consultants.

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“The National Monetisation Pipeline is being closely tracked by global sovereign wealth funds, pension funds and infrastructure funds. As the underlying assets are operating, provide visibility of a regular cashflow stream and do not have development and construction risk, the assets are well suited for yield investors,” said Srishti Ahuja, Partner, Strategy & Transactions, EY India.

Further, given that some assets will have a revenue growth trajectory (eg: toll roads and airports) and some assets will have a fixed revenue profile (eg: transmission assets), the various pools of assets will have the ability to attract a diverse set of global investors.

The success of the programme, however, will also be dependent on the contractual framework. If the concessions are long term (at least 15 years) and if the risk allocation framework assigns risks in proportion to the underlying asset returns, the interest will be higher vis-à-vis a scenario where the two are misaligned, as an instance, where the investors bear the risk of capex approvals/capacity augmentation but their returns are capped, she said.

The aggregate asset pipeline under NMP over the four-year period, FY 2022-2025, is indicatively valued at Rs 6 lakh crore. The estimated value corresponds to around 14 percent of the proposed outlay for the Centre under NIP (Rs 43 lakh crore).

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This includes more than 12 line ministries and more than 20 asset classes. The sectors included are roads, ports, airports, railways, warehousing, gas and product pipeline, power generation and transmission, mining, telecom, stadium, hospitality and housing.

Union Budget 2021-22 had identified monetisation of operating public infrastructure assets as a key means for sustainable infrastructure financing. The Budget had provided for preparation of a ‘National Monetisation Pipeline’ of potential brownfield infrastructure assets. NITI Aayog in consultation with infra line ministries has prepared the report on NMP.

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