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BL Research Bureau

Realty player Housing Development and Infrastructure (HDIL) has reiterated its strength in the lucrative slum rehabilitation segment by bagging the Mumbai Airport Slum Rehabilitation project awarded by Mumbai International Airport (MIAL). HDIL expects the project to generate revenue flows of Rs 15,000-18,000 crore over the next five years.

Under the deal, HDIL would re-settle the slum dwellers and hand over the 276-acre cleared land to MIAL in return for development rights in the same place (the size of such developable area is unspecified). According to the company, the rehabilitated land itself amounts to 25 million sq ft, which means that the development rights could be much more.

We expect the company to benefit significantly from such development rights as projects in land surrounding the airport have the potential to generate high returns. Further, slum rehabilitation projects carry a higher internal rate of return (40-80 per cent) than typical real estate projects, given that the deal involves low budget construction in return for high value land.

Slum rehabilitation projects are ridden with risks and uncertainties, given the regulatory issues difficulties in evacuation of dwellers. However, that HDIL has won this project in a competitive bidding process highlights its technical qualification in dealing with such projects. The company has a track record of rehabilitating close to 30,000 families in Mumbai under rehab schemes.

In the present project, the company has already tied up for clearing 180 acres of land. It has also identified parcels of land for rehabilitation. These moves indicate a smooth start, increasing visibility of revenues which have been targeted to flow from the first quarter of 2008.

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