Prozone Realty keeps Rs 68.18 crore inventory unprovided

Prozone Realty Limited retained Rs 68.18 crore of inventory relating to floors 12 to 14 in four Nagpur residential towers without a value adjustment or provisions as of September 30, 2026, despite the Supreme Court staying a favourable High Court order on August 21, 2026. Management says the original aviation clearance is likely to be revalidated.

Why has Prozone Realty kept Rs 68.18 crore unprovided?

Prozone Realty has kept the Rs 68.18 crore carrying value of inventory on floors 12 to 14 of four towers unchanged because management believes the chances of revalidating the original aviation no-objection certificate, or NOC, are high. The company also made no provision for expected demolition and rehabilitation costs or customer interest that could arise if bookings are cancelled in the quarter and half year ended September 30, 2026.

That judgement rests on independent technical reports, including a communication, navigation and surveillance, or CNS, simulation study, a calibration report and obstacle-limitation studies. Management also cited part occupancy certificates, the July 8, 2025 Nagpur Bench order and legal advice supporting the subsidiary's case. The statutory auditors drew attention to this accounting treatment but gave an unmodified conclusion on the consolidated results approved on November 5, 2026.

What is the Nagpur tower-height dispute about?

Prozone Realty's subsidiary Hagwood Commercial Developers Private Limited obtained an Airport Authority of India, Nagpur NOC in March 2012 permitting construction to 48 metres above ground level for five years. Relying on that permission, Hagwood built four of five planned residential towers, each with 14 floors, before applying for renewal in February 2017.

Airport Authority of India, Nagpur cancelled the earlier NOC in August 2017, according to Prozone Realty. An appeal filed in 2018 was rejected in May 2019, when the Appellate Committee of the Ministry of Civil Aviation instructed airport operator Mihan India Private Limited to act under the 1994 Aircraft demolition-of-obstructions rules. The disputed portion is therefore the top three floors, 12 through 14, rather than the whole development.

Nagpur Municipal Corporation issued part occupancy certificates in August 2022 for four towers up to the undisputed 11th floor, covering 206 units out of 336 total units. It required the Rs 3.96 crore demolition and Rs 3.31 crore rehabilitation bank guarantees from Hagwood. By September 30, 2026, occupancy certificates had been received for 242 of 264 flats through the 11th floor, while certificates for the remaining 22 flats were pending.

What has happened in Prozone Realty's court case?

Prozone Realty's subsidiary won a July 8, 2025 High Court order that quashed the Appellate Committee's November 22, 2024 rejection and directed aviation authorities to conduct an aeronautical study and CNS simulation within six months after issuing a cost demand. Hagwood submitted its application to Airport Authority of India, New Delhi and Nagpur on July 25, 2025.

Hagwood subsequently paid Rs 23.60 lakh, including goods and services tax, for the aeronautical study and Rs 16.99 lakh, including goods and services tax, for the CNS simulation on August 22, 2025. Airport Authority of India, Nagpur sought technical details by email on May 4, 2026, which Hagwood says it supplied. Prozone Realty then filed a contempt petition on July 29, 2026, alleging that the directed studies had not started.

The High Court dismissed a review application from Airport Authority of India, Nagpur and other respondents on April 2, 2026. However, the authority filed a Special Leave Petition, or SLP, challenging the July 2025 and April 2026 judgments. The Supreme Court issued notice on August 21, 2026 and stayed the impugned High Court order while the appeal is pending.

Hagwood filed its counter-affidavit in the SLP on September 22, 2026, and Airport Authority of India filed a rejoinder on October 8, 2026. The case was last listed on October 15, 2026 and adjourned to November 26, 2026 for hearing. That pending hearing is the disclosed near-term legal event affecting the NOC reassessment process.

How much of the Nagpur project is operationally recognised?

Prozone Realty had handed over possession of 201 units by September 30, 2026, from the 242 units with occupancy certificates up to the 11th floor. One customer took possession during the September 2026 quarter, and the group recognised revenue and proportionate project cost for that unit in the quarter and six-month results. These recognised units are below the floors identified in the Rs 68.18 crore inventory disclosure.

The company applied in February 2024 for part occupancy certificates for 42 flats and had received certificates for 36 of them by the reporting date. The remaining 22 flats lacking part certificates are part of the 264 flats through floor 11. The disclosure separates this municipal approval process from the aviation dispute over the permitted elevation of the upper floors.

Prozone Realty said information obtained through the Right to Information process from Mihan India Private Limited and the Airport Authority of India suggested there had been no pilot or airline complaints that the four towers obstruct safe flight operations. The company also commissioned an independent aeronautical study through a former Airport Authority of India official, alongside a CNS simulation and navigation-system analysis, which it says did not identify the buildings as a major flight-path obstacle.

How does the dispute fit into Prozone Realty's September results?

Prozone Realty reported inventories of Rs 409.88 crore at September 30, 2026, compared with Rs 402.28 crore at March 31, 2026. The Rs 68.18 crore upper-floor inventory remained in that balance without an impairment adjustment, while the group reported a Rs 31.64 crore net loss from continuing operations for the September quarter and a Rs 38.47 crore loss for the six months.

The continuing outright-sales segment recorded revenue of Rs 16.64 crore in the September 2026 quarter, up from Rs 15.54 crore a year earlier. Its segment result, including an exceptional item, was a loss of Rs 23.42 crore, compared with a loss of Rs 6.65 crore a year earlier. The quarter included a Rs 17.79 crore write-off of expenditure on a proposed mall transaction for which management said no future economic benefits were expected.

Separate from the Nagpur matter, Prozone Realty completed the sale of three mall subsidiaries on August 24, 2026. The group received Rs 669.91 crore net of share-purchase-agreement adjustments on completion and recognised a Rs 615.14 crore gain on derecognition of the mall operations as discontinued operations. Those discontinued-operation gains drove consolidated net profit of Rs 566.44 crore for the September quarter, despite the loss in continuing operations.

Conclusion

Prozone Realty continues to recognise Rs 68.18 crore of upper-floor Nagpur inventory and has not accrued demolition, rehabilitation or customer-interest costs. That accounting position depends on management's assessment of technical material, part occupancy approvals and legal arguments, while the aviation NOC dispute remains unresolved after the Supreme Court stayed the earlier High Court order.

The next disclosed event is the Supreme Court hearing scheduled for November 26, 2026 on the Airport Authority of India's SLP. Further developments to watch include whether the aeronautical and CNS studies are undertaken, whether the pending occupancy certificates for 22 flats are issued, and whether legal or technical developments cause Prozone Realty to revise the inventory value or provisions.