CHENNAI: The city may soon be losing out a few star hotels. They are likely to be converted into luxury homes as the hospitality sector has hit a low with declining occupancy and fall in business.
R Kumar, chairman of Confederation of Real Estate Developers’ Associations of India (CREDAI) Tamil Nadu and managing director of Navin Housing and Properties Pvt Ltd, told CE that many star hotels in Chennai are being taken over by real estate tycoons.
He says that many hotel owners are now opting to sell their properties or convert them into luxury homes rather than investing more or refurbishing their hotels.
Star hotels in the city like J W Marriot, Atlantic Hotel and Breeze Hotel have been bought by real estate tycoons after there was a proposal to bring them down and build residential projects on the same location.
But Sivaramakrishnan, head, residential services, CBRE, India, feels that it is not just the downturn in the hotel sector, but a few other issues that could have forced these hotels to go in for the ‘conversion’.
Real estate boom has subsided in the city, but real estate developers are now eying the prime lands where the hotels are set up, says Kumar.
According to Indiaproperty.com, many developers feel that investing in a ready-built property rather than constructing one from the scratch is a better option.
J W Marriott’s new property at MRC is now all set to be revamped. City-based real estate developer Ceebros has acquired the ready-made building at a whopping cost of `480 crore. The sea side view and proximity to schools and corporate offices are a few factors that are boosting prices in this area. Apartments here can cost anywhere between INR 15,000 and 20,000 per sq ft, says Indiaproperty.com. But Sivaramakrishnan feels such prices are astronomical in the history of Chennai. “It will be interesting to note how Chennai market will react to these prices, and whether properties would be bought at such prices,” he says. Besides him, there are many other who question the marketability and saleability of such properties.
Kumar says many star hotels which had plans to refurbish are now exiting by selling their properties at a good price. “They feel the land would fetch the hoteliers a better price than their business,” he says.
ICRA Limited, an Indian credit ratings agency, has predicted a negative growth for the hotel industry during this financial year, with uncertain demand conditions.
Meanwhile, many real estate developers are not happy with the artificial rise in land prices and even oppose foreign direct investment in real estate.
Kumar says Foreign Direct Investment (FDI) in real estate has increased the land prices so much that it is difficult to have affordable homes in the city. Now, affordable homes are possible only 45 km away from the city, he says. However, he advocates for FDI in infrastructure stating that the repayment in infrastructure is for a long time unlike real estate, which is more of a cash and carry business.
Kumar also hits out at the policy which has now reduced the townships from 100 acres to mere five acres or even less, due to the demand for the land.
Real estate developers are not only eying the hotels but also industries. Kumar says many industries along the Old Mahabalipuram Road have sold their property to real estate developers after the land prices escalated. “The artificial rise in land prices don’t augur too well for the sector as well as common man who dreams of a home,” says Kumar.