Hotel industry keeps away from DDA plot auction

Despite slashing the reserve, or bid opening, price, by almost 10 per cent, a DDA drive to auction hotel plots received lukewarm response, reports Moushumi Das Gupta.

india Updated: Dec 20, 2006 03:28 IST

Despite slashing the reserve, or bid opening, price, by almost 10 per cent, a Delhi Development Authority drive to auction hotel plots on Tuesday received lukewarm response.

Of six hotel plots that went under the hammer, the DDA managed to sell just three for Rs 574 crore. Parsvnath Developers bought one plot in Dwarka City Centre, Sector 14, for Rs 449 crore, the highest in DDA's auctions so far. One plot in Shahdara was bought by Anus Finlease and Construction Private Limited for Rs 68 crore and one other in Shalimar by Brilliant Buildtech Private Limited for Rs 55 crore.

With the Commonwealth Games just four years away and the Capital facing a shortage of approximately 15,000 rooms in five-star and budget hotel category, the poor response has set the alarm bells ringing in the agency. What has worsened matters is absence of the established hotel industry in the auction.

Hoteliers said even after a 10 per cent slash, the reserve price was still very high. "It does not make economic sense for a hotelier to invest Rs 60 crore in a plot in Shahdara. After investing such a huge amount, a hotelier will have to charge exorbitantly to recover his investment. Where will the clientele come from? Who will like to spend so much for staying in a hotel in Shahdara," said SP Warty, executive director, Jaypee Group of Hotels.

Warty said that only if DDA enters into a joint venture partnership with the established hotel industry such high-ticket projects would become viable.

OP Mendiratta, general secretary, Forum of Star Hotels in Delhi, agrees. "It's high time that construction at the hotel sites starts. The government should take steps like increasing the FAR (floor area ratio) of existing hotels if they want to meet the acute shortage of hotel rooms," said Mediratta.

In September also, DDA had managed to sell just one of the 10 hotel plots on auction. It sold a plot in Rohini for Rs 48.05 crore to a Delhi-based company, Star Realty Private Limited. The other plots in areas like Dwarka, Shalimar Bagh, Paschim Vihar and Shahdara with reserve price varying between Rs 45 crore to Rs 683 crore did not find any takers.

This year, so far, DDA has already raked in Rs 1,200 crore by auctioning 13 hotel plots. However, so far work has started in just one of the plots in Okhla.

DDA estimates about 1.5 lakh tourists during the Games. At present there are 11,000 hotel rooms available in the organized sector (those having licenses) - in both the star and budget category. There is a need to augment rooms in the five-star category by another 10,000 and, in the no frills category, by another 5,000.

Email Moushumi Das Gupta

First Published: Dec 20, 2006 03:28 IST