Small realtors raise hotels to perk up project value

Meenakshi Verma Ambwani Bindu D. Menon New Delhi | Updated on July 18, 2012

Move helps real estate developers spread their risk among various kinds of assets.

Two, three, five or seven stars? This is the question that small and medium developers seem to be asking themselves when they build hotels. But biggies like DLF and Unitech are selling their non-core assets — read hotels.

As mixed-land use becomes the norm, smaller developers see an advantage in developing hotels as this unlocks the land value and increases project valuations.

“Real estate players can extract the best valuation by doing mixed land development where they build hotels along with residential and commercial space,” said Mr Dilip Puri Managing Director, India and Regional, and Vice-President South Asia, Starwood Asia Pacific Hotels & Resorts.

Additionally, it is also helping real estate developers spread their risk among various kinds of assets.

Echoing this, Mr Santhosh Kumar, CEO (Operations) Jones Lang LaSalle, said, “Developers are building hotels so that they can leverage on the land cost. Hotels and service residence add immense value, especially in townships, and developers see this as a sure-shot way of increasing property value.”

According to a recent white paper by hotel consultancy firm HVS India and World Travel and Tourism Council (India Initiative), 1.80 lakh rooms would be required in India across segments by end-2012.

Take a look at the number of players setting up a hotel arm.

Orris Infrastructure is setting up two 150-room hotels to be operated under the mid-scale brand Holiday Inn, while Assotech Realty’s new project, Assotech Business Cresterra, will house a four-star serviced residence, Sandal Suites.

Another realtor, Assotech Ltd, is launching its own brand of three-star hotels under the ‘Ehita’ brand. Others like Falcon Realty and Omaxe also have hotels projects in the pipeline.

Many of the projects are coming up in Greater Noida, Gurgaon, Rudrapur, Bhubaneswar, Raipur, Gwalior and Haridwar.

“We are planning a four-star hotel with 275 rooms in South Delhi and will invest Rs 90 crore. We assessed the demand keeping in mind Japanese and European expatriates working here,” Mr Bhim Yadav, CMD of Falcon Realty Services, said.

Mr Chris Moloney, Chief Operating Officer, South West Asia, IHG, had recently said, “For the majority of owners in India, hotels are not the core business. We spent a lot of time understanding how to communicate better with these owners.”

Industry watchers say if there were 500 people who were doing it earlier, now only 250 are in fray.

However, the process of becoming putting up hotels has its share of troubles as the cost of finance and lack of management control in running hotels are prohibitive.

Mr Akshay Kulkarni, Regional Director, South and South East Asia, Cushman and Wakefield, says that “increasingly fewer big developers are getting into the hotel business. Lending is tight and owners hate the idea of others managing the hotel. They want recognition and control.”


Published on July 18, 2012

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