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Realtors off load non- core assets.

TILL late- 2007, most developers were optimistic about the growth prospects of the hospitality sector.

But as the recession set in, developers were forced to go slow with their plans and dispose of their non- core assets.

" Divesting the investment- heavy hotel plans seems to be the best way out for the cash- strapped, heavily indebted players to survive the present day economic scenario. There is more focus to complete the on- going projects on the residential side," Sudeep Jain, executive vice- president ( India), Jones Lang LaSalle- Meghraj Hotels, said.

According to a survey titled ' Funding real estate projects for the hospitality industry: Emerging perspectives' by international property consultants Jones Lange LaSalle- Meghraj, there are limited funding options for developers as public and private equity have dried up for hotel projects. For instance, the country's largest developer, DLF Ltd,

has put 21 of its 40 hotel plots on the block to raise funds and retire a part of its Rs 14,000- crore debt. It is repaying Rs 600- 1,000 crore every month and plans to reduce the debt by half by the fiscal- end.

After selling its hotel property in Gurgaon for Rs 200 crore, the country's secondlargest realty firm, Unitech Ltd, now plans to sell four more hotels in Noida, Kolkata and Gurgaon within the next two months in order to retire part of its Rs 8,400- crore debt.

Yet another realty major Parsvnath Developers has also put its hotel projects on the block as it is facing a severe cash crunch. Like its peers, Parsvnath, too, entered the hospitality segment when the real estate sector was booming.

It had formed Parsvnath Hotels Ltd ( PHL), which aimed to build 100 hotels in seven years. The company has finalised 20 hotel and service apartment projects across the country under different star categories in standalone and mixed- use models. The hotel projects in Hyderabad, Ahmedabad and Goa have received government approval and fivestar rating. Its Lucknow property is rated four- star.

The company has tied up with ITC subsidiary Fortune Park Hotels to manage its proposed 50 hotels. PHL and Royal Orchid have also jointly formed a company named Parsvnath Royal Orchid Hotels Ltd ( PROHL) to develop a minimum of 10 hotels ( four five- star, four fourstar and two three- star properties) in India, according to the company's website.

The survey, which has put some options before the industry, said divesting a part of the stake in the project to garner capital could be a way out.

Also, instead of planning a high- end luxury hotel one could look at serviced apartments and budget hotels for now to get through the credit crunch.

Reducing the scale of the project could be another option, the survey said. This could be done in one go or in stages. Completing the projects in stages, where part of the hotel could be operational in a relatively lesser time and with lower investment than earlier planned would help ease the credit crunch.

There are quite a few operators who buy stakes in the project as well, said the survey.

European hospitality major Accor is a good example of such an operator, which has significant expansion plans in India. It has plans to set up 50 hotels over the next two to three years in India. In India, Accor has a joint venture ( JV) with real estate developer Emaar MGF. Earlier this year, US- based hotel group Hyatt Global Corporation had also tied up with Emaar MGF. It signed a 24: 76 joint venture agreement with Emaar MGF for building six hotels under the upper midsegment brand Hyatt Place.

Both companies will invest Rs 1,000 crore in the project.

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Publication:Mail Today (New Delhi, India)
Date:Sep 19, 2009
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