The Royal Garden Villas and Resort in Bangalore is a master-planned gated community with exclusive amenities, including a chateau winery, opulent club house, world-class spa and pool. Besides these, the property also boasts a five-star hotel, Vijay Amritraj Tennis & Fitness Center, internationally renowned shops, restaurants , an equestrian center and supermarkets.

Also included in the plans is a movie theatre, which is slated for phases 2 and 3. “We see the integrated township format as a key driver of future housing supply and as a catalyst for the much needed infrastructure investments in India. The Indian government has spelt out key incentive policies to provide an impetus towards easing the flow of private investments and Royal Garden City is one of the first to have been conceptualised and planned to meet this objective,” says Manoj.

Under this initiative, RIRIC plans to develop firstclass resort communities and modern satellite cities in India, with the first project coming up near the new Bangalore airport. The project is touted to be one of Asia’s largest new city developments and is expected to become a model for such projects. The company has also planned similar projects in Mumbai, Delhi and Kolkata.

The first phase of the 6,000-acre development in Bangalore is conceived to be built on 3,000 acres and will include 13.59 million square meters of built-up space. Further to these developments , RIRIC has partnered with one of the worlds largest hotel chain’s to build budget style hotel rooms throughout India at an estimated investment of US $ 5 billion. The firm also has plans to announce exclusive rights in India with one of the world’s largest realty marketing groups by June.

The Royal Garden Villas & Resort, Bangalore, RIRIC’s inaugural project, lies on approximately 400 acres of prime land situated between downtown Bangalore and the new Bangalore International Airport. The project will offer residential apartments from bungalows to townhouses and the ones modelled after luxurious western subdivisions. Manoj says, “We will offer affordable homes from $ 80,000 to $ 300,000, as well as high-end villas that are in the half million dollar range.”

Through ingenious landscaping and architectural designs, Royal Garden Villas & Resort has been endowed with the look, feel, grace and sense of community enjoyed in Tuscany, but also offers amenities that could never even be imagined in rural Italy. Tuscany Square, in the heart of the Royal Garden Villas, is not just elegant but a standing testimony to refined living. In the charming piazza, with its feeling of a friendly neighborhood, residents, along with their children and guests, can sample fine cuisine or casual fare, the best of local and imported goods, or simply relax by the fountain and plan the rest of the day.

About Rs 2,400 crore will be invested over five years to set up about 35-50 properties. These will be the two-star Vedic Inn, a mid-scale Vedic Domina and five-to-seven star resorts — Vedic Resorts and Palaces. The partners will have equal share in the investment.

All models — joint ventures in Goa, space sharing and management contracts — will be explored. Domina will also set up a special purpose vehicle to offload equity to private equity funds, and part-fund its hospitality venture. Plans are afoot to take the Vedic brand overseas in the next two-and-a-half years. Sujit Kanoria, managing director, Shristi, told DNA Money, “First we want to perfect the Vedic brand and then decide which sub-brand can be taken overseas.”

Kanoria is certain that they will not acquire running hotels overseas, but opt for management contracts of Greenfield properties. “Getting clearances for owning land is comparatively easy overseas. In India, hoteliers need a single window clearance for all approvals,” he said.

Properties are in the process of coming up in various parts of West Bengal and Bangladesh border, while negotiations are on in Bangalore, Pune and Goa.

In case of land acquisition, Shristi is looking for leases, full ownership and joint development. “We are looking to mitigate our risks and are open to all business models,” said Kanoria. Shristi and Domina will develop the properties and Domina India will manage them.

Internationally, London hotels charge $300-450 while star properties in Moscow and Rome charge $260-350 and $140-350 respectively. But while the situation is acute even in traditional high-cost cities such as New York where room rates spiraled up 15.4 percent last year to an average of $320.87, according to an American Express report some of the strongest surges have been in Asia. With the upcoming Olympics in Beijing this August, China’s room rates have leapt 20 percent since last year. But despite the surge, room rentals in China and Singapore still range around $155 for the former and $137 for the latter as against India’s $350 in the deluxe category.

Shanghai alone boasts 135,000 rooms as against India’s 110,000 in the organized three to five-star categories. According to a report by Federation of Indian Chambers of Commerce and Industry (FICCI), China has 10 times more, and the United States 40 times more rooms to rent out. The New York metropolitan region alone has about as many three to five-star rooms as all of India.

A country smaller than New Delhi, Singapore has nearly half of India’s capacity, with over 50,000 rooms to offer. China also leads India in infrastructure development with 316 hotel projects in the pipeline, almost double India’s current 161.

Meanwhile, the skyrocketing prices are impacting business, especially in Bangalore, which accounts for 51 percent of foreign business travel to India. Rooms here are so scarce that even big local companies like Infosys Technologies and Wipro have had to construct their own hotels and guesthouses to accommodate visitors and save on atrocious hotel bills. Microsoft too, is exploiting its Live Meeting videoconferencing technology to whittle down travel costs of its sales/marketing people.

“The last two years have been especially bad for business people and travelers as demand simply can’t keep pace with the limited supply,” says a senior manager at a Delhi-based outsourcing company. “So hotels invariably command premiums for their rooms.”

And that they do. Prices at the spiffy, 279-room Oberoi, situated in the heart of Delhi, for instance start at US$345, breakfast not included. Despite the prohibitive price tag, its rooms and suites have been chockablock almost every night since October last year. Ditto at the ritzy Taj Mahal Hotel (a chain offering 7,000 rooms across the country) where last season even VIPs were applying pull to try to find accommodation. In Bangalore, the Leela Kempinski is charging up to $550 on busy days almost at par with one of the most luxurious hotels in the world, The Peninsula in Hong Kong.

What explains this shortfall and crazy room prices? Several factors, actually. With India gaining economic clout in the world arena, International visitors are flocking in to clinch deals, attend conferences or simply gawk at the Taj Mahal. Proliferating low-cost airlines and subsequent slashed airfares due to enhanced competition have brought domestic travel within reach for the middle classes. Real estate is booming, attracting droves of investors.

The current room squeeze has had other negative fallout. India’s tourism arrivals, which in any case lag most other Asian countries, are anemic. Against India’s paltry 4.6 million tourist arrivals in 2006, China received 49.2 million, Malaysia 17.5 million, Hong Kong 15.8 million, Thailand 13.9 million and even tiny Macau 10.7 million.

This is ironic because India’s potential for earnings from tourism, given its stunning geographical and cultural diversity, is enormous. On average India earns $1,620 from every foreign tourist, triple the amount France does and nearly double of the global average.

“An average tourist tends to stay longer in India because of the size of the country and the spectrum of attractions it offers. But the room shortage combined with infrastructure woes and an imminent tourist rush during the upcoming Commonwealth Games in 2010 will only worsen the crisis,” says P.K. Chari, a Mumbai-based travel agent.

To defuse the situation, the tourism ministry is scrambling for rooms. A couple of years ago, it launched the ‘Incredible India Bed and Breakfast Scheme’ as a stopgap arrangement to add an estimated 20,000-25,000 rooms to meet the hotel room shortfall in New Delhi for the Commonwealth Games. It invited families to convert their homes into bed-and-breakfast establishments which could charge about $35 a night. The goal was to offer another 10,000 rooms in time for the Games. However, the scheme has met with a lukewarm response with not even 100 families taking the offer.

To entice hoteliers, the Urban Development Ministry has proposed that those who complete their projects before 2010 will be eligible for a range of tax concessions and incentives. The ministries of railways, civil aviation and the state governments, too, are following investor-friendly land policies and adopting a single-window clearance for promoting hotel projects.

But even if new hotels do come up, a Federation of India Chambers of Commerce and Industry study on investment opportunities in hotel infrastructure points out that fresh investment would at best add 53,000 rooms in the next five years, while the current shortfall is 150,000. Also, even if hoteliers do want to take up new projects, prohibitive real estate prices are acting as a huge dampener. This is especially true for Mumbai which ranks at number three after London and Tokyo in global real estate price surveys.

To make matters worse, the government’s restrictive regulations for hotel construction are doing nothing to improve things. The ministries follow archaic laws that limit the amount of land for sale, further driving up prices. To curb this, Union Tourism Minister Ambika Soni has sought a 10-year tax rebate for new budget hotels and is also encouraging Indian Railways to give up some of its vast land holdings for trackside hotels. If these measures are put in place, about $6.5 billion may be invested in constructing hotels.

Meanwhile, foreign investors are rushing to fill the gap. Hilton has won approval for 75 new hotels in India by 2010 while Ramada Hotels has entered into a tie-up with Royal Orchid, an Indian company, to build four- and five-star properties nationwide. The Taj group, meanwhile, is planning $22-a-night hotels with plans for 100 hotels, called Ginger Hotels, within five years.

Accor, a French group, has announced plans along with Emaar, a Dubai-based developer, to invest US$300 million to bring 100 of its “Formula 1″ hotels to India. Accor is also bringing the Sofitel chain to Mumbai. Starwood Hotels also plans to invest heavily in hotel construction. The expansion will include brands as diverse as the Sheraton, the Westin, Le Meridien, W and Aloft, an $80-a-night offering for business travelers. In Mumbai, a long-awaited 231-room Four Seasons Hotel will open later this year while the Lemon Tree Hotels chain will execute its plans for 19 budget and mid-range properties with 2,400 rooms across the country.

Rajinder Kumar, the president of the Hotels and Restaurants Association of Northern India, says it is not enough. All the above activity is skewed in focus and will cater only to future requirements, he worries. The need is to urgently tap the unorganized hospitality sector to take care of the current shortfall.

“What the government is not focusing on is the mid-market,” says Kumar. “It should give small hotels and guesthouses incentives so that they upgrade their services to form an organized mid-market segment. Focusing on big hotels is no way to go about things if we have to be ready for the rush during the Commonwealth Games.”

In Bangalore’s Whitefield suburb, once a magnet for IT firms, supply outstripped absorption by 300,000 sq ft in 2007 and about 8% of the developed area remained vacant, data from real estate consultancy Cushman & Wakefield (C&W) show. Prices are stagnating and the situation is deteriorating. In the first three months of 2008, the demand-supply mismatch was more than a million sq ft.

If Whitefield is in a bad way; the Old Mahabalipuram Road (OMR) technology cluster on the outskirts of Chennai is deep in the doldrums, with just nine deals in the whole of 2007. Of the four million sq ft that came into the market last year, only 1.7 million sq ft were absorbed even as rentals fell by 18% and the vacancy rate was up to 11%, again according to C&W data. Most of the more than half a million sq ft that entered the market between January and March have gone a begging.

Property developers’ greed must take a major portion of the blame for the current plight, even insiders say. “The key factor contributing to the oversupply is the consistent overpricing of projects in both micro markets. Developers who priced projects at Rs 4,000 per sq ft were unknowingly killing their golden goose in a sense,” Shriram Properties managing director M Murali said.

Whitefield and the OMR cluster, where IT and technology-enabled services firms occupy most of the office space, could be delivered another blow when a government scheme which provides tax incentives to companies in so-called “technology parks” comes to an end next year.

“STP (Software Technology Park) units and business parks in both locations will take a beating in rentals with the sunset clause (for the Software Technology Parks of India scheme) ending in March 2009. Firms will now increasing look towards Special Economic Zones (SEZs), rendering a number of buildings vacant,” Mr Murali said. And a prolonged downturn in the US will only add to the misery. The OMR cluster also faces a peculiar problem: the Tamil Nadu government does not permit IT parks and STP units to lease space to non-IT firms.

“A number of developers of STP space in Chennai have started offering a variety of attractive terms such as free car-parks, incubation space while the project is under construction, lower deposits and rent-free periods so that they do not have to bring down the base rent. Given the competition, a number of them are also appointing exclusive marketing agents to market their IT parks,” Ramesh Nair, the MD of Jones Lang LaSalle Meghraj said.

The silver lining for property developers could be the interest from start-ups and mid-sized firms as rentals fall. Nearly a third of the transactions in both the OMR cluster and Whitefield involved small- or mid-sized firms.

The Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will be part of a 300-acre, mixed-use project in the city’s Nandi Hills area, approximately 10 kilometers from the airport. The project will also consist of a first-class 18-hole golf course and a residential community comprised of approximately 225 single-family homes.

“We continue to be excited by the robust opportunity India presents as we implement our global growth strategy,” said Ed Fuller, president and managing director for international lodging at Marriott. “This particular project holds great promise. Its golf course, extensive conference facilities which, at 1,940 square meters will be the largest among the hotel’s competitors, and spa will be an enormous advantage in helping the hotel penetrates more than its fair share in the meeting, convention and leisure segments.”

Guest rooms at the Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will feature stylish appointments and Marriott’s famed plush bed and bath linens and amenities. For dining and entertainment, the hotel will have three restaurants, including an all-day casual restaurant offering three meals daily and two specialty dining outlets; a lobby lounge, pool bar and entertainment bar.

In addition to the golf course, which will be operated by Prestige, recreational amenities will include a 1,800 square-meter spa, sauna, gym, Jacuzzi and 10 treatment rooms; a fitness center and an outdoor swimming pool. Other amenities include a business center with four workstations, two offices, a meeting room for small conferences and two boardrooms; an executive floor and lounge with its own meeting room; retail shops; and a gift/sundries shop.

For conferences and social events, the Bangalore Marriott Golf Resort & Convention Center at Nandi Hills will offer 1,940 square meters of space including a 1,200 square-meter ballroom which will be divisible into five sections: a 450 square- meter junior ballroom divisible into two sections; three individual meeting rooms, each also divisible into two sections; and a 50 square-meter ballroom.

Also under development in Bangalore are the JW Marriott Hotel Bangalore (2009, Renaissance Bangalore Hotel (2010), Renaissance Bangalore High Grounds Hotel (2010), The Ritz-Carlton Bangalore (2010).

The 344ft (105m)-tall structure is one of the three towers of the Aquila Heights project that will be launched April end by Tata Housing Development Co. Ltd on land earlier owned by state-owned watch and tractor maker HMT Ltd.

Designed by Singapore-based architects Ong and Ong Ltd, the Aquila Heights project is said to have retained 89% of the 6.3-acre project as open space. “The reason why we decided to go so tall is to make sure that we keep maximum ground space,” said a Tata Housing spokesperson from Mumbai. The project will be completed by 2010. Bangalore has few tall buildings compared with larger metros such as Mumbai, which boasts of buildings that rise beyond 600ft. Local authorities, however, say the situation here is changing fast.

“Real estate development in Bangalore has mostly focused on horizontal villa projects rather than building tall towers. But now, many such tall projects are coming for approval and we are considering them primarily on the basis of the infrastructure provisions like water, roads in that area,” said A.V. Rangesh, town planner member of the Bangalore Development Authority, or BDA. Rangesh said there are a few more residential projects of more than 25 storeys each awaiting BDA’s approval.

Brigade Gateway, for example, is another upcoming high-rise project in Yeshwantpur with a 30-storey commercial building called North Star, which the Bangalore-based realtor Brigade Group says would be the tallest commercial building in the city once it is completed in 2009.

Currently, the tallest building in the country—the 100-storeyed APIIC Trade Tower—is being built by Andhra Pradesh Industrial Infrastructure Corp. in Hyderabad. Some other high-rises being built in India include the stalled Shapoorji Pallonji twin tower project in south Mumbai, the 67-storey Oberoi Skyz project, which will have only 44 apartments, and the 57-storey Lodha Bellissimo in central Mumbai. Till recently, the 24-storey Utility Building on Mahatma Gandhi Road was the tallest building in Bangalore.

Real estate consultants in the city say Aquila Heights should open to good response from buyers, for whom it would be a matter of pride to live in the tallest building in Bangalore. Pranay Vakil, chairman of Knight Frank India Pvt. Ltd, explained this trend as a graduation for Bangalore, which resembled a low-rise city such as Washington.

“With professional property managers coming in, builders will go for taller buildings because such projects require additional attention and specific care. Infrastructure issues such as power have also been a problem in Bangalore projects and taking a lift to the 30th floor was always considered to be a challenge.”

The mall, which would be the largest in South India, would come up on 5 acres at an investment of Rs 400 crore. The project would be ready by the end of 2009, said Ashok Ganguly, vice-president, (marketing and communication).

Nitesh Estates has already locked up property for rolling out similar retails initiatives in Chennai, Thiruvananthapuram and Kochi in the next six months. This apart, it would set up super premium retail avenues in five-star hotels it is building in Bangalore and Chennai.

The shopping mall, being designed by a Seattle-based architecture firm, will be come up at Indira Nagar.

Nitesh Estates, the real estate arm of the Bangalore-based Nitesh Group, has launched ‘Nitesh Wimbledon Gardens’ at Kochi. Located on the Airport-Seaport Road, the project comprises 900,000 sft of residential area, besides 500,000 sft of office spaces and 100,000 sft of retail area with shopping malls, fitness centers, health clubs and a multiplex. The project also has two roof-top helipads, said RS Mani, chief executive officer of the company.

Yatra has invested Rs 111.62 crore in Palladium Constructions, which will develop a mixed complex of retail and residential buildings, for a 30 per cent stake. Yatra has also invested Rs 63.44 crore in another entity Platinum Hospitality Services for a 30 per cent stake. Platinum will develop a hotel in Bangalore.

Yatra has committed Rs 914.62 crore of Rs 1,375 crore of the capital it has raised. The company has invested in nine real estate projects/entities so far. Palladium Constructions will develop a 1.9 mn square feet of mixed use complex of retail and residential buildings. The development will comprise 1.4 mn square feet of retail space and 0.5 mn square feet of residential space. The project cost is nearly Rs 950.12 crore, the company said.

Platinum Hospitality Services will develop a 0.5 mn square feet hotel property, including serviced apartments. The hotel will be built at a cost of estimated Rs 402.62 crore. Construction on both properties is expected to begin in the last quarter of 2008 with the entire project expected to be completed in five years, the company said.

Yatra invested Rs 23.31 crore for 0.47 per cent equity in Phoenix Mills in 2007. Betting on returns of over 25% in Indian properties and stagnancy in realty markets of Western countries, a host of international funds such as Citigroup, Blackstone and Morgan Stanley have invested in Indian properties. According to estimates, nearly Rs 20,000 crore has been invested by international and domestic private equity funds in the Indian property market in 2007.