Hotel deals: It's a buyer's market
Returns down in hospitality; buyers looking for a bargain; owners unlikely to get back investment
Oct 08, 2013
Source : Business Standard


DELHI: Even as about 30 branded hotels and 40 non-branded properties and land parcels are on the block in the hospitality industry, experts say for big-ticket transactions, it might turn out to be another wait-and-watch year, unless the economy improves and the asking prices of most of these assets fall.

For most companies, the primary reason for selling properties is debt reduction. Leela Hotels, for instance, has been undergoing corporate debt restructuring for its Rs 4,300-crore debt and has to complete the process by March 2014. Experts say the hotel chain would have to get some of its assets off the shelf.

At a time when returns in the hospitality segment have not been rewarding, to say the least, many transactions have been stuck due to the high prices sought by owners. "The seller wants to get back at least the price he invested. No transactions are likely to happen on profit, as buyers are in a mood to bargain. There could be distress sales now," said Ajay Bakaya, executive director, Sarovar Hotels group.

Even if prices decline, additional challenges abound. These include political uncertainties, a falling rupee and policy paralysis. Buyers have been hit by the negative sentiment and are weighing investment options between India and other countries. "There are concerns about the larger macroeconomic scenario and deals will start only when there is clarity on this issue. Policies are not well defined; all the rules that govern your investments are just so fluid," said Kaushik Vardharajan, managing director, HVS India.

Also, arranging funds hasn't been easy. Real estate company DLF's proposed deal for Aman hotels with its founder Adrian Zecha had to be called off due to valuation and funding issues. DLF has also been trying to reduce its debt burden by hiving off non-core businesses, including assets in the hospitality sector. "Hotel is a long-term business. The gestation period is long. Several real estate companies have burnt their fingers after having invested in boom time," said K B Kachru, executive vice-president, Carlson Hotels.


With room supply outpacing demand and average room rates stagnant, hotel chains have been struggling to stay afloat. However, for long-term investors, this is a good time to buy assets. Companies such as Samhi hotels and Ireo have invested in the Indian hospitality sector and accumulated funds for more such opportunities. Equity International and GTI Capital, owners and early investors in Samhi, have agreed to invest about $100 million in the company's expansion plans.

After Goldman Sachs announced its plan to exit its Four Seasons investment in India, more private equity investors are looking to offload investments. Credit Suisse's investment of Rs 220 crore ($55 million) in the Park Hotel in 2007 is expected to find its way out soon. Kotak Private Equity, too, is keen on exiting its investment of Rs 11 crore in Pride Hotels group this year. "We are planning to go for public listing this year. Our PE investor could wait till then to decide on an exit," said S P Jain, managing director, Pride Group of Hotels. An analyst said it wouldn't be easy to exit in the current market situation.

Latest Realty News

Govt mulls easing FDI rules for construction development
Oct 08, 2013
DELHI: In a bid to bring foreign money to the cash-strapped realty sector, the department of industrial policy and promotion (DIPP) has moved a Cabinet note seeking relaxation of riders on foreign direct investment (FDI) in the construction development sector. The move comes after FDI in real estate dropped 57 per cent year-on-year in 2012-13 .
Red Fort Capital to invest Rs 1000 crore in Lotus Greens projects
Oct 08, 2013
DELHI: Realty firm Lotus Greens Developers today said private equity firm Red Fort Capital would invest Rs 1,000 crore in its various residential projects in the national capital region.
Godrej Properties partners Ador Group to build housing project
Oct 08, 2013
DELHI: Godrej PropertiesBSE 0.77 % today announced an agreement with Ador Group to develop a luxury housing project spread over almost seven acres in Mumbai.
Knight Frank ties up with FICCI for realty sentiment index
Oct 08, 2013
DELHI: Property consultant Knight Frank India today said it has entered into an agreement with industry chamber FICCI to launch an index that would measure sentiments in the real estate market.
Tata housing project in Sukhna opposed; SC seeks Centre's reply
Oct 08, 2013
DELHI: The Supreme Court today sought responses of the Centre and Punjab government on a plea against Punjab and Haryana High Court's decision to allow Tata to go ahead with its housing project coming up near Sukhna Lake in Chandigarh.
Festival deals flood property market as realtors try to cut inventory
Oct 07, 2013
DELHI: Real estate companies are rushing in with discounts and freebies ahead of Diwali, a time that accounts for a high volume of home sales in the country. Across the country, residential projects offering deals have risen 45-50 per cent in the run-up to the festive season and may double further by Diwali and the year-end as realtors attempt to clear piled-up inventory.
Otis sees scope for growth in India's real estate market
Oct 07, 2013
DELHI: Leading manufacturer of elevators, US-based Otis, is betting big on India’s real estate market, mostly vertical, to grow its business in the country. In spite of all the talk of a slowdown in real estate, Otis Elevator Company’s president (Asia Pacific area), Patrick Blethon, who’s here for a week, told Business Standard that the pace of construction in India could create a new Chicago every year for the next 30 years in terms of the built-up area.
DDA to hold auction of commercial properties
Oct 07, 2013
DELHI: Thousands of prime commercial properties are up for sale in Delhi. After a gap of about one year, Delhi Development Authority is about to start selling properties in the capital. Over 50 commercial plots, six multilevel car parkings and two banquet halls have been opened up for auctions.
Buying your first house? Here's a checklist of 9 sales pitches that you should be wary of
Oct 07, 2013
DELHI: Newly-weds Dipankar and Ashima Gupta have made up their minds to buy their own house. The first trigger came last year, when two of their close friends bought property. Then their landlord sounded the warning that he would raise the rent again. What sealed the decision was the salary hike that Dipankar got this year. "We might as well pay an EMI instead of giving rent to the landlord every month," says Ashima.
Before buying a property, read the sales agreement carefully
Oct 07, 2013
DELHI: It can take months, even years, to find a dream home. After extensive bargaining, when you manage to seal the deal, remember to go through the sale deed in detail before signing on the dotted line.

Latest Realty News Of State

Realty Talk's