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News & Views on Indian Real Estate

Tuesday, June 24, 2008

Builders Pull out of Hotel Ventures as Profits Dry up

Real estate developers with presence in National Capital Region (NCR), Bangalore, Chennai, Pune, among others, are opting out of four and five-star hotel projects. As cash flows in the real estate sector are slowing. Realtors are reconsidering plans to enter the hospitality sector. Developers are looking at realising their money through any alternative means and are thus in the exit mode. The developers are facing cash crunch and have either put the property (unfinished buildings in some cases) on sale or have asked the hotel companies to find them partners who can invest in the venture. To be sure, players in the field believe that this slowdown could benefit the big players in the market and hoteliers will look to acquire land in areas where it was otherwise difficult for them to make purchases. Builders could be putting the land to commercial use as the land rates (FSI cost) are too high (more that 50 per cent of the cost of the project for a hotel), and the commercial market is bullish. Also, a particular micro market may see many hotel rooms coming up, as a result of which a non-hotelier developer may develop cold feet. Feasibility studies to that effect have a tendency to scare a developer as it is easy to predict supply and difficult to predict demand for hotel rooms.

mansih said...

Investment in hotel business does not as quick return as investment in residential and commercial real estate, that's why major investor are pulling out.

vikas said...

Property is a lifetime investment. When a person makes decision to buy a house, he/she thinks for the market price of that locality and the existing rate trend. If we talk about the scenario these days, sales of real estate have crashed but prices have not come down considerably. Further downside is projected which will be healthy for the sector.

Architectse said...

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