Hospitality: A lucrative zone for realty growth in Gujarat
Mar 12, 2014
Source : The Times of India


AHMEDABAD: Statistics show that Gujarat witnessed 6 per cent growth in property prices in last one year and the property price index in the state remained volatile. However, what the statistics does not reveal is the fact that during the same period, many of the cities that National Housing Bank’s Residex tracked down, did witness either no change or downward change.

Out of the 26 cities that it covered across the country, only 12 cities witnessed marginal appreciation, and two cities of Gujarat- Ahmedabad and Surat, registered 6 per cent and 5 per cent growth respectively. More importantly, the transaction rate in the cities of Gujarat did not dip. This reflects that the property markets of Gujarat have been moving, even though the pace of movement was slow.

Analysts tracking the market at ground zero seem to be bullish on the prospects of Gujarat real estate market. They maintain that moderate property appreciation is actually indicative of the market’s resilience and the fact that speculative buying is not happening in this part of the world. This also means that the entry point is extremely attractive for the end-users and the right time is now. After all, the state has seen a booming rise of big infrastructures, and industrial projects are coming up at a rapid pace. These factors definitely contribute in ensuring good returns on property investment. Further, the fundamentals of the property market are quite grounded to realism across the cities of Ahmedabad, Vadodara and Surat.

Dhaval Ajmera, director, Ajmera Realty & Infra, asserts that this is the right time to buy property in Gujarat. He says, “Gujarat as a state has seen remarkable growth in various verticals, real estate being one of them, which also is indicative of a healthy economic activity in the state. The state, currently is one of the fastest growing states in the country and definitely has huge potential in terms of real estate investment due to industrial growth.

Nearly 42 per cent of US hotel business is run by the Gujarati community. Asian American Hotel Owners Association, which has 9,000 members and 90 per cent of whom are Gujaratis, says, “Indian-American hoteliers pay $700 million for taxes every year and create a million jobs.” Upper-grade chains like Marriott, Hilton and Starwood are now more open to franchising their hotels in Gujarat. The question is can this be translated into the Gujarat market? After all, the state of Gujarat has seen phenomenal growth in tourism.

As per the latest figures by the Tourism Corporation of Gujarat Ltd (TCGL), there has been a growth of 13 per cent in this sector in Gujarat.

The number of tourists to Gujarat on an average in the last three years has been a whopping 2.5 crore (25 million) every year. The increased interest in Gujarat by international hotel players is fuelled not only by leisure tourism but also the soaring demand in business travel. The state has become a hub for agro-based products and food processing, biotech, pharmaceutical, textile, automobile and IT industries. The entrepreneurial spirit of the state, coupled with well developed infrastructure, increasing air connectivity and the progressive policies of the state government have encouraged foreign investments especially from countries such as Japan, USA and Canada.

The city of Ahmedabad alone has witnessed an aggressive growth of 25 per cent in its room inventory. While large-scale events in recent times such as Vibrant Gujarat and DERMACON have given a boost to MICE travel, the large NRI base continues to drive occupancies during the wedding season.

In the last one decade, Gujarat has positioned itself well as an investment destination and enacted lucrative investment policies and incentives for almost all sectors/industries. It has provided for single window clearance system, which has reduced hassles for potential investors. Gujarat is developing into an important industrial hub with establishment of various SIRs, SEZs and projects like GIFT city, etc., and in the process has helped a lot in the growth of the hospitality sector as a chain effect.

The industrial growth has led to a good demand for hotels, especially upscale and luxury hotels, to cater to the commercial segment. Gujarat has seen robust addition of hotel and hospitality services to cater to this demand in the recent past. Generally, developers resist from entering into hospitality sector, as it is not only about project development and operating a hotel requires huge expertise as well. The phenomenon is similar in many other cities too, though, the track record of Gujarat is relatively better.

Analysts believe that the hospitality industry needs to cater to the local demand while maintaining its international appeal to be relevant in this part of the world. For example, majority of the population of Gujarat is vegetarian. This is a reason why many 5-star hotels in the state have vegetarian restaurants in their premises. So, the way forward in the state is to have the international players’ tie-up with the local real estate developers for spaces, thus, both can benefit with this kind of arrangement.

Revati Kasture, CGM and head – Research and Grading with CARE Ratings, says, “With the intention of accelerating hospitality industry in the state, Gujarat government has formulated lucrative policy of investment to attract more investors to augment the overall hospitality infrastructure. With the new tourism policy in place, Gujarat government has also provided more assistance for the investors in hospitality sector like tax holidays, interest subsidies, concession in electricity duty and tariff, modification in lending criteria, assistance in land acquisition and allotment, etc.”

She adds further, “The major deterrent for the hospitality sector is Gujarat is the fact that it is a dry state. Thus, Gujarat is not able to capitalise on its leisure segment and thereby, hotels are also reluctant in investing at tourist locations and concentrate themselves to the business driven areas. However, to provide super luxury experiences and niche proposition, developers are tying up with branded hotels and this is an emerging trend across many cities. Such an arrangement provides instant brand connect to the customers. Further, to remain asset-light, many hotels are being developed by real estate players and then operated by the prominent hotel companies. Also, models like mixed use development, double-brand strategy are being adopted.”

In conclusion, while the hospitality is a thriving business in Gujarat, the real estate developers have not taken this vertical of operations seriously like housing, retail or commercial. However, the success of the hotel business in key cities like Ahmedabad and Vadodara suggest that soon the developers looking to expand their project portfolios will enter into this segment and that may change the dynamics of hospitality business in the state.

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