Hospitality gearing up for steep climb ahead-IV

By: Manu Sharma

Track2Realty Exclusive

Since the hospitality sector was previously considered a part of Commercial Real Estate (CRE) and was subject to the same risk exposure, the cost of such debt was high. In September 2009, new guidelines on CRE released by the Reserve Bank of India, asserted that the hospitality sector would no longer be treated as a part of CRE and risk exposure would be based on the profile of the borrower and the nature of the project.

These new guidelines are significant for the more established hospitality players who now benefit from a lower risk weightage and consequently, lower interest rates.

The entry of Private Equity (PE) funds into India has made the task of raising equity for projects much easier, as the major players have access to significant levels of capital and have greater appetite for risk than banks. Availability of PE funds has also enabled existing hospitality players to attract investments at the company level as opposed to a project level, thus giving them the flexibility to use these funds as they deem fit.

A decade back, when one talked about ‘eating out’ at a standalone restaurant, in collective consciousness it meant going to Kwality, Gaylords or Nirulas. Today, F&B offerings in India have evolved and are fast making a mark for themselves in the global F&B arena, too.

Until recently, five-star hotel restaurants were considered the epitome of fine dining experiences in the country. However, the rapid growth in standalone restaurants is seriously challenging the former for top honours. With a well travelled upwardly mobile consumer, new and trendy food concepts are a rage in the Indian F&B business.

Standalone restaurants like Indigo, Tote, Olives, Tetsuma, Trishna, Zest, Smoke House Grill, to name a few have raised the bar for the F&B offerings across major metros; each outlet has a unique selling proposition (USP) that has become its claim to fame.

…..to be continued