Well-planned aerocities have the potential to become engines of regional growth by stimulating investment, creating jobs, and driving urban modernisation. However, to fully leverage India’s aviation boom, they require robust structural support, writes Rajeev Vijay.
In the last few years, along with the rapid expansion of the aviation industry, airports in India have evolved beyond merely being transport hubs. While the core airport activities are increasing with growing passenger and cargo traffic volumes, airports are transforming into vibrant economic centres, strongly integrated into urban development. This transformation is driven by the dual focus on generating non-aeronautical revenues and development of aerocities, not only as key revenue sources for airport viability but also as catalysts for regional economic development and regeneration.
Non-aeronautical revenues are central to the financial stability of modern airports. While revenue generated from traditional aeronautical fees, such as landing, parking and passenger charges, remains important, it is subject to fluctuations based on passenger traffic and airline operations. Therefore, non-aero revenue, which includes revenue generation through retail concessions, food and beverage, real estate and advertising, provides a steady and diversified income stream. As per Knight Frank India analysis, airports under public-private partnership (PPP) management generate
87 per cent of India’s total non-aero revenue while handling 64 per cent of total passenger traffic, demonstrating how effective management and commercial strategy can maximise revenue potential.
Large airports in India, such as Indira Gandhi International Airport (Delhi) and Chattrapati Shivaji Maharaj International Airport (Mumbai), have focused on increasing their revenues from non-aeronautical sources, as a result of which more than 50 per cent of their total revenue comes from these components. Even in comparison to some of the key global airports, when adjusted to purchasing power parity (PPP), Mumbai and Delhi airports generate per capita non-aero revenues of
$20 and $18, respectively, approaching international benchmarks such as London Heathrow ($21.6) and Tokyo’s Haneda ($19.9) airports. Within the non-aero category, duty-free retail and food and beverage outlets remain the two largest revenue drivers. To further increase the generation of non-aero revenues, airports are increasingly focusing on real estate and land development, developing aerocities into integrated commercial hubs.
Aerocities are large-scale commercial real estate developments located within 10-15 km of the airport radius. They encompass hospitality, office, retail complexes, logistics parks and exhibition centres, generating revenues via real estate and commercial activities. Unlike conventional urban expansion, aerocities leverage airport connectivity as a catalyst for investment, enabling the creation of self-sustaining urban ecosystems. Airports in major Indian cities such as Delhi, Mumbai, Bengaluru and Hyderabad, which are operated by private players, have been allocated large land parcels for aerocity development.
High-value airport real estate
Key revenue streams from aerocities include land leases, real estate rental income, service charges for utilities, parking fees, and transport infrastructure. Commercial real
estate development in aerocities is predominantly positioned in the premium category, strategically designed to cater to business travellers and high-spending passengers. These developments typically feature grade A office and warehousing spaces, upscale hotels, and luxury retail outlets, ensuring high service standards. For instance, in the Delhi Aerocity, hotel brands such as JW Marriott, Pullman, Hyatt and Novotel coexist alongside top-tier commercial buildings, such as Worldmark, Caddie Commercial Tower and Prestige Trade Tower. Given their strategic location with seamless connectivity, such developments attract multinational corporations, technology firms, and service industries that value proximity to international and domestic gateways.
Moreover, the premium positioning allows airports to command higher lease rentals and long-term partnerships with established brands. With 95 per cent occupancy and rentals between `200 and `230 per square foot, mixed-use real estate project Worldmark Aerocity commands more than 2.2x the average office rates in the National Capital Region (NCR).
Beyond direct revenue generation, these premium real estate assets enhance the overall passenger experience, transform airports into urban destinations, and strengthen their competitiveness on a global scale. In effect, they contribute not only to the financial sustainability of airports but also to regional economic development by creating employment opportunities, boosting tourism, and promoting business ecosystems around the airport zone.
Unlocking non-aero revenue
The symbiotic relationship between aerocities and non-aero revenue is noteworthy. Airports provide connectivity and infrastructure, attracting businesses, residents, and visitors. In turn, surrounding developments generate additional revenue that funds airport expansion, improves passenger experience, and strengthens regional economies. This integrated approach creates multiple economic multipliers in the form of direct employment in airport operations, retail, logistics, and hospitality and indirect employment generation through supply chains, construction, and services, and induced employment from household spending and local consumption. Therefore, well-planned aerocities become engines of regional development, stimulating investment, generating jobs, and promoting urban modernisation.
Furthermore, the potential economic impact of aerocities extends beyond airport precincts. By creating clusters of commercial, residential, and industrial activity around airports, aerocities can alleviate pressure on congested city centres, provide high-quality employment opportunities, and enhance regional connectivity. The integration of airports with urban development also supports tourism, business travel, and international trade, further reinforcing the role of aviation as a driver of national economic growth.
International experience further emphasises the long-term benefits of airport-led urban development. Singapore’s Changi Airport contributes approximately Singapore $4.5 billion annually in non-aero revenue, supporting city-wide development and employment. Dubai South and Dubai International Airport have helped transform Dubai into a global trade and logistics hub, attracting multinational corporations and regional headquarters. Seoul Incheon’s airport city has become a model of integrated planning, combining logistics, business, and residential infrastructure, and contributing to South Korea’s broader economic competitiveness. In comparison to their global peers, aerocities in India are still at a nascent stage. However, they hold significant development potential. India can learn from some of the successful examples while tailoring development to domestic urbanisation patterns, regulatory frameworks, and investment capacities.
Opportunities over obstacles
However, despite the inherent promise, the development of aerocities and non-aero revenue streams for airports has been facing challenges. Primarily, land acquisition for such large-scale urban development projects is often complex, requiring coordination with multiple stakeholders. This often delays project commencement, raising costs and deferring rental income. In addition, infrastructure support—roads, metro connectivity, utilities, and commercial facilities—requires substantial capital and meticulous planning. Economic viability also remains a concern at times, with real estate development dependent on sustained demand and high occupancy.
For stable revenue generation, the real estate spaces must maintain high occupancy rates, and local demand must justify investment in commercial infrastructure. Along with timely execution, ensuring social and environmental responsibility is crucial for an aerocity’s long-term viability and environmental, social and governance (ESG) compliance. This entails adopting green building practices, energy-efficient infrastructure, and sustainable waste and water management systems to minimise environmental impact.
Hence, it is essential to emphasise PPPs as they can be a vital enabler in addressing these challenges. The PPP models allow for optimum allocation of resources, sharing of financial risk, and timely completion of infrastructure projects. Strategic urban planning integrating real estate development with adequate social and transport infrastructure has the capacity to enhance the attractiveness and viability of aerocities, ensuring they remain vibrant hubs rather than isolated pockets of development. Similarly, data-driven management of non-aero revenue—using passenger analytics and commercial insights—can optimise retail and hospitality offerings, enhancing passenger experience and boosting revenues.
Government policy plays a particularly critical role in realising the potential of aerocities and non-aero revenue. Streamlined regulatory approvals, incentives for private investment, and integrated transport planning are essential to encourage development. Policies that promote green building standards, energy-efficient transport, and environmentally sustainable urbanisation can mitigate the ecological impact of large-scale development. Additionally, fiscal measures such as tax incentives or subsidies for commercial developers and airport operators can attract private capital and accelerate project implementation.
Looking ahead, India’s aviation sector is projected to handle over 600 million passengers by 2030, up from approximately 412 million in FY2025. This growth underscores the need for planning airport-led urban development and leveraging non-aeronautical revenue streams. Airports have the
potential to transform from transport nodes into urban anchors that drive innovation, investment, and employment, fostering economic growth well beyond the confines of airport terminals.
Thus, the evolution of airports into aerocities represents a paradigm shift in urban development and aviation economics. By integrating infrastructure with real estate development and strategically leveraging non-aeronautical revenues, India can build vibrant economic hubs that drive regional growth, create jobs, and attract global investment. This transformation is not only a financial imperative for airport authorities but also a national priority, capable of reshaping cities, improving the quality of life, and driving India’s broader economic development. Rethinking airport-led development is no
longer optional. It is essential to ensure that India’s aviation infrastructure supports sustainable, inclusive, and long-term urban and economic growth.
About the author:
Rajeev Vijay, Executive Director, Government and Infrastructure Advisory, Knight Frank India.