Step Aside Hoteliers, GenNext Is Here

New Entrants From Real Estate Fuel Hotel Construction Boom

Savio Rodrigues - Mumbai

Traditional hospitality giants and real estate majors such as Taj, Oberoi, ITC, Leela, Rahejas, Lokhandwalas, Lok Group, Hiranandani, Unitech Holdings, Unicorn Holdings etc will now have to make way for the new entrants from the realty sector who are fast making their mark in the Indian hotel sector.

Fueling the on-going hotel construction boom in the country are real estate companies like Delhi-based DLF Group, Uppals, Ansal Properties and Odeon Builders with projects in New Delhi, Mumbai, Gurgaon and Jaipur. The Mumbai-based Oberoi Constructions, Nirmal Lifestyles, Kanakia’s, Runwal Constructions and Magus Estates are also eyeing hotels in the commercial capital as well as Goa, Bangalore and Chennai.

Also in the run are the Bangalore-based realtors Puruvankara Group, Embassy Group, Adarsh Group, Prestige Group, RNS Group, and Sigma Group with projects in Bangalore and Chennai. With a hotel project already in the pipeline in Hyderabad, the Dubai based Emaar Properties has plans to develop more hotel projects in Mumbai and Bangalore.

While the trend ‘realtors to hoteliers’ is certainly not nascent, in the past year the Indian hospitality industry has seen a significant rise in real estate companies towing the hotel rope. This business diversification on part of the realtors, industry analysts ascribe, is on account of the booming tourism and hospitality industry in India and a natural extension to their current profile. According to Vikas Oberoi, managing director, Oberoi Constructions, “The prime element of a hotel is the asset - land and hotel project, these elements to real estate companies are easy to procure and develop due to their huge financial corpus. And all a real estate company needs to do is tie-up with a hotel management company.”

According to Vijay Vancheswar, head-corporate communications, DLF Group which plans to build a hotel and service apartment on the recently purchased 17-acre Mumbai Textile Mill land for Rs 702 crore,”It makes good business sense for real estate companies to set up hotels as against residential or other commercial properties as development costs are kept to the minimum due to the rules that allow higher floor space index (FSI) for construction of hotels. And it most cases the real estate companies end-up getting 100 per cent return-on-investment (ROI) in the long run as the value of the asset appreciates eventually.”

Said Jitu Virwani, chief executive officer, Embassy Group,”Most real estate companies diversify into hotels as the ROI in a hotel project is high”