Potential and roadblocks co-exist for hotels-IV

By: Ravi Sinha

Track2Realty Exclusive

Industry experts assert it is difficult to put a time frame on certain requirements like getting over a 100 government permits from the time of starting construction to completion. Historically, hotel construction in India has been somewhat cumbersome owing to the multiple clearances/approvals required from Central and State Government agencies. These clearances/approvals differ from state to state and in some cases, as many as 110 licenses are required by hotel projects. It often leads to a price escalation of about 15%.

Support from the government to revive and develop the hospitality industry has come in the form of certain policy changes. While in the past, policies such as declassifying hotels from within Commercial Real Estate (CRE), relaxation in the External Commercial Borrowing (ECB) norms, and investment-linked tax deduction for establishing new hotels of two-star category and above have been implemented; in December 2010, the Union Cabinet approved setting up of a ‘Hospitality Development and Promotion Board’ (HDPB).

India, with a population of more than 1 billion, has only about 104,000 rooms, according to Government estimates. In comparison, New York City alone has more than 80,000 rooms. Demand for hotel rooms far outstrips supply in India, and this has attracted global players like Starwood Hotels & Resorts, Marriot International, Hyatt Hotels, InterContinental Hotels and Accor Hospitality.

Analysts say in a few years competition could jump to levels that could put pressure on Indian firms’ room rates as they face-off with global giants, but will still manage to grow on rising demand for rooms in Asia’s third-biggest economy.

India requires investments worth 600 billion rupees over the next five years to cope with the unmet demand for about 150,000 rooms, according to FICCI-Evalueserve.