Sarovar spreads out as realty prices pinch

The company is setting up 23 new hotels at an investment of over Rs500 cr

KOLKATA: With prices of real estate going through the roof, Sarovar Hotels is looking at acquiring land away from city centres and larger towns for Hometel, its budget brand of hotels.

Working towards this end, the company has acquired land on Old Mahabalipuram Road, which is 20-30 km away from the city centre in Chennai, and in Sriperumbudur in the south. It is also looking at Bhiwadi in Rajasthan, 50 kms from Gurgaon.

The one-acre plot on Old Mahabalipuram Road was acquired for Rs 4 crore and the two acres at Sriperumbudur for Rs 6 crore. “There is enough demand here but no competition,” Ajay Bakaya, executive director, Sarovar Hotels, told DNA Money.

“Real estate prices have been rising by about 20% a year. International players are willing to pay a price — in the form of sky-rocketing real estate rates — for entering the booming Indian hospitality market. But domestic players need to be cautious. If they buy land at a high price, these won’t have viability if the market shows a downturn,” said a hospitality industry analyst.

In large towns and cities, where land is too expensive, Sarovar is looking at lease options to balance out the cost of land acquisition. These places include Chandigarh, Indore and Ahmedabad.

In Ahmedabad, the company was negotiating for leasing a cold shell property, ie, just a building structure. In Chandigarh, it was in talks to lease land from a private individual for starting a greenfield project.

The hospitality company is setting up 23 new properties at an investment of over Rs 500 crore. Sarovar’s own commitment has been to the tune of Rs 150 crore. The company has about Rs 200 crore of investible funds.

Earlier, Anil Madhok, managing director, Sarovar Hotels, had indicated that the company was weighing the option of an IPO or private equity to raise Rs 250-300 crore. Of the 23 new projects, some would be company-owned while the rest would be managed.

About five of the new properties would be the upper-end four star Park Plazas, two will be three-star full service Park Inns, four Sarovar Premiers, 3-4 Porticos and the rest would be the budget brand, Hometel.

m_madhumita@dnaindia.net