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SPV to monetise PSU land in last lap

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AgenciesFreehold land will be transferred to this proposed firm, which will monetise it through direct sale or through the real estate investment trust or REIT model.The government is firming up contours of the special purpose vehicle for monetising land available with public sector enterprises, which is likely to be on the lines of NBCC and could operate on a fee-based model, said a senior official.

Land assets of central public sector enterprises (CPSEs) under closure and non-core land assets of CPSEs under strategic divestment would be pooled and then monetised by the company.

“It will be more or less like a permanent entity, which would continue to monetise land assets. Separate set of expertise and people will be needed, who will have to be recruited,” the official said, asking not to be named.

If the titles of the land are transferred to the company then it would be able to earn from the sales, however if the titles remain with the CPSEs or ministries, a fee would be charged for the sale or development process, the official added.

Freehold land will be transferred to this proposed firm, which will monetise it through direct sale or through the real estate investment trust or REIT model. CPSEs that cannot monetise land assets on their own would also form part of the pool, rather than large entities or CPSEs that can undertake monetisation on their own.

While several models for creating the special purpose vehicle have been considered, including the Canada Land Company’s model, the government has zeroed in on NBCC as it may be better suited to India.

“Necessary changes in legislation on stamp duty and capital gains have been approved in the Budget, so will help in creating the structure,” the official added.

The company may have a similar structure to NBCC, which has operations in three key areas of project management consultancy, which includes redevelopment of government properties and is the largest revenue contributor. The other two areas are engineering, procurement and construction contracting and real estate development.

“Discussions are going on, it should be finalised soon. We will then take Cabinet approval,” the official added.

As per the 2016 guidelines on disinvestment, a land management agency engaged for disposal of real estate assets will get a fee of 0.5% of the value realized from disposal of such land subject to a cap of ₹1 crore.

Some of the CPSEs under closure include Scooters India Ltd, Hindustan Flourocarbons Ltd, Bharat Pumps and Compressors Ltd and HMT, which may have land assets lying idle and could be monetised.

Among companies under strategic divestment, the department of investment and public asset management (DIPAM) has made segregation of non-core assets including land, apartments and housing complexes an essential part of the process, which will be done prior to divestment of the CPSE.

The government has made asset monetisation as one of its key agendas for generating revenue, value creation and reducing debt of public sector units. Even in the case of state-run companies not being divested, the government is strongly pitching for a carve out of non-core assets or de-merging and selling them to generate revenue for capital expenditure, reduce debt and improve efficiency.

Source: indiatimes.com

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