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Monetisation of Infrastructure Assets in India: A Must To Bring Top Investors In India

Mar 9, 2018 12:03 PM 2 min read

India has an infrastructure deficit pegged at around $1.5 trillion according to the Finance Minister of India. The fact that bridging the infrastructure deficit can bring in foreign investment in India is well known. We posit that a way to boost FDI in India especially in infrastructure is by focusing on monetising land banks that are held by both public sector and private sector entities.


Two factors that make land banks especially attractive are their large sizes and optimality for infrastructure usage. Infrastructure projects ranging from tapping renewable energy sources to dry ports require large tracts of land.  Hence large land banks provide the ideal sites for large scale infrastructure projects. The need then is for investors to work with policymakers and corporations to monetize the existing land banks for financing and creating the much needed infrastructure in India.


Monetization of high quality land bank allows infrastructure to be created and financed from otherwise non-functioning assets. From the investors’ perspective, financing through land bank monetization achieves multiple objectives. Firstly, investors get access to high quality land that can be utilized for infrastructure projects. In the past, land acquisition has been a major impediment to infrastructure investing in India. It is not otherwise easy to get large tracts of economically viable land even if the investor does have an interest to invest in such land.


A public policy in India from the government, targeted at monetizing land banks held by state institutions, railways and airports in India will greatly aid this mission. Secondly, an investor acquiring attractive land banks from private corporations will help investors finance stressed balance sheets due to heavy debt levels. Given the stressed balance sheets of many corporations, land banks can be acquired at attractive valuations by the investor. Apart from the investor getting access to high quality land banks, this helps corporates to get the much needed funding.


Monetization of high quality land banks allows investors, corporates and the infrastructure using public to benefit from a symbiotic system. India has a demographic environment that lends itself to high consumption. As the young population starts consuming even more and with increased urbanization, the demand for infrastructure is only set to rise. Investors acquiring land banks that will be used to develop infrastructure in, but not limited to aviation, housing, logistics, healthcare, energy, ports and education, provides them with an opportunity to create attractive return yielding infrastructure while also creating social value.


Policymakers would be more than pleased to see foreign investment in India's long dated infrastructure assets. The infrastructure consuming public can only benefit from high quality infrastructure being funded and created. Monetizing attractive land banks essentially creates attractive assets for investors while also creating a financing mechanism to create much needed infrastructure assets in India.


Originally Published in Emerging Markets Summit Blog