India Rewriting Rules of Real Estate with Aerocity-Led Growth

By: Ankit Kansal, MD, Axon developers

India is one of the 3rd largest aviation market after USA and China. The country has around ~140 domestic airports alongside ~ 50 international airports. Its yearly air passengers have reached 150 million in 2023 and is set to cross 300 million by 2030. In addition to a vibrant airport infrastructure, India is also developing 100 new regional smaller airports and airstrips to complement the existing aviation market under UDAN scheme. Likewise, it is working on 50 new greenfield airports alongside expanding existing ones. As per the Boeing, India will require 2400 new aircrafts by 2041. This will be around ~ 90% of the market demand in the entire South Asian region.

Indian aviation is not just marching ahead in terms of passenger volumes but also ramping up its air cargo capability. In FY 24, the total air cargo amounted to 3.4 million tonnes growing yearly by 7%. By the end of this decade, Indian air cargo handling volume is slated to reach 10 million tonnes. Creating a dynamic air cargo infrastructure is also strategically aligned with India’s ambition of becoming a manufacturing powerhouse. In a country where around 70% of the goods transport is done via the roads, investing in air logistics will enable faster transportation and lower the overall pollution levels. It is also required to further push India’s e-commerce industry.

Playing a diversified role: Rise of Non-Aeronautical Revenue Base

Airports are now playing a much bigger role in the economy with the rise of the Non-Aeronautical Revenue (NAR). The revenue streams of the Indian aviation are no more limited to passenger fees, airplane handing charges, hanger charges, etc. Many airports are now aggressively developing new channels comprising retail, hospitality, conventions, display spaces, real estate, F&Bs, etc. Adjacent to airports, industrial parks, business parks, warehousing hubs, etc. are developed for commercial purposes.

Globally NAR contributes to around 60% of the revenue. Interestingly it comprises around ~ 80% of the airport profits, which further underscore their crucial role. In India, however the NAR is limited to 15-20% of the revenue in most of the traditional airports. This however is altering as increasingly airport developers, operators, and development agencies are realizing the financial potential and strategic significance of NAR. In big airports such as Mumbai and Delhi, the NAR component consist of over half of the revenue.

Building on NAR via Aerocity Development

Airports are also building expansive Aerocity projects to further tap into the lucrative real estate potential of the land around. These self-sustainable commercial suburbs are emerging as parallel CBDs with host of high street, 5-star hotels, swanky commercial buildings, top notch restrobars & fine dining, etc. Initially these Aerocities were developed to cater to the transit tourist base. However, they are now liked by affluent travellers and local city dwellers alike.

Both established businesses are start-ups that love to set up their offices in Aerocities as it helps them gain better branding and foster meaningful interaction & networking opportunities.

The trend of Atrocities picked up in Places such as Festival City (Dubai), Canary Wharf (London), Kualalumpur Aerocity (KL).

The very first Aerocity in India was developed by GMR in IGI airport. The 200 acres project is home to 17 hotels including numerous 5-star projects. There are around 100 F&B and multiple lifestyle stores, spas, and other retail outlets. The Delhi Aerocity can give stiff competition to other popular commercial neighbourhoods in NCR such as Golf Course Road, Cyber Hub, and Vasant Kunj.

GMR is also building another mega project in Hyderabad, spread across sprawling 1300 acres of land. It will have dedicated retail, recreational, business districts. Already Accor has opened a 290-room hotel in the region while Boston Living is developing a 1500 bed-co-living space in the region. Likewise, there are coveted projects around Navi Mumbai airport, Devanahalli airport, and Jewar airport, where work is going in full swing. GOI has also announced plans to create 150-acre Aerocity near the newly built Valmiki International Airport in Ayodhya. Other ambitious projects are in consideration in places such as Lucknow and Dehradun and might soon see commencement of initial work.

GMR is also developing a 232-acre Aerocity near the MOPA airport, which will encompass malls, hotels & conventions, office buildings, nature resorts, wellness centres, etc, giving GOA and nearby tourist places of Maharashtra and new facelift.