National highways offer returns over 15% via Realty development, says JLL

According to JLL India, a property consultant, national highways in India provide the real estate development across the country returns > 15% for potential investors and builders.

The development of the infrastructure and connectivity is estimated to drive real estate land prices at ~60-80% in the short term, and 20-25% in the long term as the facilities become active. These facilities include electric vehicle charging stations, restaurants, retail outlets and food courts.

Having recognised this growth prospect, NHAI (National Highway Authority of India) has discovered > 650 properties across 22 states with a merged area of > 3,000 hectares to be built with private sector involvement in the next five years. It includes 376 sites in under-construction new highways/expressways, 94 sites on the Delhi-Mumbai Expressway, and ~ 180 sites along a current network of highways in India.

Mr. A Shankar, Head - Strategic Consulting & Valuation Advisory, JLL said, “We envision that in the coming years, NHAI would drive modernisation of the Indian Highway network, offering major advantageous to investors, builders, highways users, industry players and facility operators.”

NHAI has appointed JLL as an international consultant for properties located in the South and North region of India. The agreement includes selecting existing and new land packages in a phased manner, recognizing possibilities for land monetization, financial viability of each site and comprehensive feasibility.

Mr. Shankar said, “Out of the 650 identified sites, 138 sites have invited bids and witnessed keen participation from market players. Most of the 138 site tenders were accepting bids until June 30, 2021.”

For this entire project, capex investment per site is estimated at Rs. 1-10 crore on average or Rs. 2.0 crore per hectare of site area, which collectively indicates an estimated private investment worth Rs 4,800 crore in the next five years.

The lessee returns for a regular site and project are estimated at ~ 15-30%. Key factors such as clear land title, no variation in land use, tax free and pre-approved sites, desirable lease tenure option of up to 30 years with accommodating project advancement opportunities would open more opportunity for growth for potential investors and developers.

The development of the real estate across this area offers significant opportunity for private sector participation. It spreads out with the established and growing demand from the highway and non-highway traffic. Additionally, the project is also expected to add impetus to India's logistics sector.