Hotel Leelaventures Ltd. eyes on hotel property market in Delhi. Leela pays Rs 611 cr to check into Delhi because Delhi property market is witnessing a huge demand in hotel property. Hotel Leelaventures is shelling out the highest price ever paid for a hotel property in Delhi and in doing so has entered the capital in a grand style. It outbid competitors like Indian Hotels, Emaar-MGF, Park hotel, ITC, Uppal Builders, Positive Builders and Park for a 3-acre plot in the heart of Delhi, offering Rs 611 crore against the reserve price of Rs 300 crore.

At a mind-boggling price of Rs 200 crore/acre, the Leela deal is twice the last record set by Emaar-MGF when they bought the Jasola property.

The South Delhi plot is strategically located on Africa Avenue and was put on the block by National Buildings Construction Corporation (NBCC). Incidentally, Leela has been trying to find a strategic location in Delhi for a while. Vivek Nair, VC and MD of Hotel LeelaVenture, said, “The group’s long-felt desire to have a hotel in the nation’s capital would be fulfilled.”

The company is creating an upmarket ‘trophy’ hotel with 250 guestrooms and service apartments. With five new hotels under construction in Gurgaon, Udaipur, Chennai, Hyderabad and Pune, the Leela Kempinski Group would have a pan-India presence. It is in this context that it was necessary to be in Delhi, Mr Nair added.

Currently, the Delhi property market is witnessing a huge demand-supply mismatch, forcing the property developers to pay abnormal prices for land acquisitions. Vivek Dahiya, director DTZ, an international property consultant firm, said, compared with the last deal in the hotel property market in Delhi, the Hotel Leela deal has witnessed a 100% increase in land prices.

The mismatch in Delhi has triggered many hotel companies to start development. According to HVS, a hotel consultancy firm. While the existing supply in Delhi is 7,030 rooms, proposed supply is 10,856 rooms, an increase of 150% in the next 5 years. Most of the development in Gurgaon and neighbouring Noida amounts to 47 new hotels in the NCR with 10,800 rooms, much of it owing to the Commonwealth games to be held in NCR in 2010.

Industry analysts believe that there appears to be a paradox in Delhi. While there is shortage of rooms in Delhi, a lot of development is taking place eventhough Delhi Development Authority is auctioning hotel sites at unviable prices. Analysts are of the view that hotel developers have made financial bids at such high prices, making it practically impossible for these hotels to make any money due to the high price of land.

Further, if hotel developers are paying such huge money for land, then it makes more sense for the five star or a premium hotel rather than a budget hotel to come up on these sites.
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  • The company would commission an 81-room hotel in Udaipur by January 2009
    with starting ARRs at Rs17,000. Another hotel would be opened in Chennai with
    380 keys by September 2009, which would take total inventory to 1,576 by March
    2010.
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