It was inevitable, really, that realty developers should get into the hospitality business. Already, they were part of luxury developments, were buying up or owned land, and had the technical excellence when it came to construction.
As for the nitty-gritties of the service sector, why, that could be sewn up through strategic tie-ups with the majors in the hotel industry.
And no, it isn't an isolated trend, with real estate developers Emaar-MGF, DLF Universal, Ansals, Vatika, Ambience and Parsvnath all venturing into the hospitality biz.
Typically, the ownership of these hotels will be retained by the developers, while large (mostly multinational) hotel chains will ally with them for management and marketing functions.
Earlier, real estate developers had capitalised on the retail boom and had diversified from building only residential properties and offices to malls.
The unprecedented boom in inbound tourism and the IT sector has led to an unprecedented shortage of rooms, with hotels all over the country witnessing their highest-ever occupancy rates.
Sanjay Verma, joint managing director, Cushman & Wakefield says he's hardly surprised by real estate developers' foray into hospitality since they "bring value to the table".
"They have large existing land banks and also the ability to acquire more land," he says. And since one of the major deterrents to building new hotels is the availability of land, it is logical that the major realtors should foray into hospitality.
Take the case of Emaar-MGF that, last month, paid Rs 400 crore (Rs 4 billion) for 15 acres in New Delhi and Hyderabad. And last week, the real estate company won the bid for a six acre hotel site in Kolkata for Rs 209 crore (Rs 2.09 billion). This property will be managed by the Inter Continental group.
Emaar-MGF has decided to enter the hospitality sector with an initial investment of $1 billion. This funding will be a mixture of equity and debt, according Shravan Gupta, managing director.
Aiming at a pan-India presence in the hospitality business, Gupta is planning five luxury hotels and 25 budget hotels by the end of this decade.
The Delhi-based Vatika group has 3,000 acres in Sohna in its kitty and it will be using 33 acres from this land bank for developing a Westin (a Starwood brand) with an investment of Rs 100 crore (Rs 1 billion).
Gaurav Bhalla, executive director, Vatika Group, says he will "invest Rs 100 crore for this project, which would be raised through accruals and negligible bank loans of Rs 2-3 crore (Rs 20 to 30 million)". Vatika has also signed up Westin Hotels for its projects in Bangalore, Jaipur and Gurgaon.
DLF had bid Rs 97 crore (Rs 970 million) for a property in Rohini, New Delhi. In all probability, DLF's hoteliering foray will be with Hilton International. But with its upcoming initial public offering, DLF is not sharing its plans for the hospitality sector just yet.
However, with special economic zones planned by DLF across the country (such as in Amritsar, Gurgaon, Pune and Kolkata), it is obvious that the company will require hotels and other related facilities. That need dovetails with the company's expansion into the hospitality sector.
In tier two and three cities in north India, Ansals will be rolling out 15 mixed mall formats that will comprise service apartments and three-star hotels. Kunal Banerji, vice president, marketing, Ansal Properties and Infrastructure, says the company will be tying up with international as well as Indian hotel chains for the management of these properties. An announcement is expected shortly.
© 2025