<! -- google_ad_section_start -->NEW DELHI: High property prices and spiralling mortgage rates are holding back numerous developers and hospitality resources from writing big cheques meant for hotel projects in China. Instead, private equity (PE) funds are working on other developing markets such as Vietnam, Malaysia and Thailand. PE players who were recently planning to purchase the Delhi-based Asian Motels (before the split), received changed their minds. Some developers are experiencing a rethink on their particular hotel projects, preferring in order to develop commercial office space, where by upfront cash investment might be less and returns tend to be quicker. PE players were happy to bring in close in order to $1 billion, but few deals are cut in the hospitality sector.
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鈥淧E funds expect a fabulous 30-35% return in 3-5 years and that鈥檚 unattainable when the real estate valuations are high, 鈥? claimed Hotel Leelaventures vice-chairman & MD Vivek Nair. Agrees Akshay Kulkarni, Knight Frank鈥檚 head of hospitality: 鈥淟arge transactions in all the domestic hotel market are receiving fewer as the rewards in India are low compared to other developing markets. 鈥? Around the world, hotel deals are buying delinked from properties. They strip off residences into separate companies or owning a home trusts while PE investors invest only within the company that manages typically the hotel business. Until this particular happens in India, hotel deals will continue to be expensive, said an official from the Mumbai-based PE fund. In particular, in Gurgaon, around 20 resort projects 鈥? involving more than 3, 000 rooms 鈥? were announced within the last 18 months, but only half-a-dozen have taken off. The private operators on the Delhi International Airport, which has drawn " up " plans for developing 10-12 hotel projects close to the airport, have quoted land rates towards tune of around Rs 50 crore for each acre. High real estate price skews industry towards luxury hotel projects while biggest demand already in the market is for mid-market not to mention budget hotels. PE fund managers point out the land price associated with several prime hospitality assignments in NCR have shot up within the last one year and this unique makes hotel projects unattractive being short-to-medium-term investment. 鈥淗otel projects require far more upfront fund infusion and additionally returns start only after completion on the project. This makes creating commercial, retail and residential space more attractive as a large section of the development is self-financed, 鈥? claimed Dawnay, Day Hotels-India MD Mandeep Lamba. The UK-based fund plans obtain around Rs 1, 500 crore over your next three years to build 10 three and four star properties across the country. All these investors are betting about the scarcity of hotel areas. There is an immediate dependence on approximately 100, 000 new resort rooms across cities; only 75% in this demand is being reached by projects underway. A result of the supply lag, average room rates and even occupancy rates have been happening more often. They鈥檙e expected to rise 20-25% over couple of years and stabilise thereafter. 鈥淚n your next 3-4 years when the newest supply comes in, valuations will happen to realistic levels. At this time, valuations are asset-driven instead of business-driven, 鈥? said Lemon Tree CMD Pattu Keswani. With 2006, occupancy rate across 10 major cities near you touched 74. 5% in addition to ARR was about Rs 7, 900. Hoteliers hope once the supply is available in, valuations will touch authentic levels. For more information on Real estate agents, MLS visit Propertiesmls. com Supplier: IndiaRealEstateblog <! -- google_ad_section_end -->
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Wed Sep 14, 2011 6:38 pm