Valuation question holds up SPV for land, asset monetisation of PSUs

The launch of the special purpose vehicle (SPV) for monetising land and other surplus assets of public sector undertakings (PSUs) has been delayed as the government is yet to finalise the methodology to value land parcels while transferring them to the new entity.

The land SPV -- dubbed the National Land Monetisation Corporation -- will be able to rent, lease, and develop assets to monetise them. It may also be empowered to acquire and develop idle land assets of PSUs that can’t be sold; it may look at converting such land parcels into revenue-generating, financially-viable projects.

The government is still finalising the valuation at which such assets will be transferred to the SPV. “Whether these assets would be transferred at book value or circle rate or market value has led to a delay in the launch of the SPV,” a senior government official said. A draft Cabinet note was circulated, and inputs have been taken from government departments, he said.

In July 2021, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had said the land SPV would soon be launched, and the entity could help utilise land parcels for urban renewal and development projects.

“Monetising land can either be by the way of direct sale or concession, or by similar means,” Finance Minister Nirmala Sitharaman said while announcing the SPV in the Budget.

Transferring land assets at a concessional rate or even book value will not add any value to PSUs, said Nirmal Gangwal, founder of Brescon & Allied Partners. Professional agencies should be brought in to value these assets of PSUs and such land parcels must be transferred to the land SPV at market value minus the cost of development or approvals. The SPV can then sell these to private buyers by recovering the cost of development, and even earn a profit, he said.

“In case, a land parcel is not transferred, and the SPV is acting as a land management agency, whether the owner would continue to be the administrative ministry is also one of the issues that are being discussed,” the official quoted above said.

Transfer of land assets should be smooth and speedy, and must not lead to litigation, said N R Bhanumurthy, vice-chancellor at B R Ambedkar School of Economics University, Bengaluru. The process should be aimed at maximising value for public sector entities, he said, adding that the process of monetisation, whichever is finalised, should take care of these issues.

In the draft Cabinet note, the Centre had proposed setting up of the National Land Monetisation Corporation under the Companies Act; it would be 100 per cent owned by the government. The authorised share capital of the SPV has been pegged at Rs 5,000 crore. It would be entrusted with hiring experts, and will devise a process to monetise government buildings, land parcels of PSUs and government departments. The SPV would undertake transactions, and also provide advisory services to government departments that are facing difficulty or delays in monetising their assets. It would house experts to resolve disputes hampering the sale of such properties.

The Centre had also amended the Finance Act so that demerger of land parcels of PSUs or transfer to another PSU is exempt from payment of capital gains tax and stamp duty.