Parsvnath Decides to Sell Hotel Projects Due to Severe Cash Crunch

March 30, 2009	(1 votes, average: 5 out of 5)  Loading ...
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Realty major Parsvnath Developers has put its four hotel projects on the block as it is facing severe cash crunch due to a slowdown in the real estate sector, people familiar with the matter said. These projects, spread over Hyderabad, Goa, Ahmedabad and Lucknow, are currently under construction. A spokeswoman for Parsvnath Developers denied any plan to sell hotel projects. “There is no such initiation of talks on any hotel projects from Parsvnath Developers,” she said. But people familiar with Parsvnath’s plans said the Delhi-based realty firm is looking for buyers for its projects as it doesn’t have enough cash to continue construction and it also needs to raise funds to continue operation and pay salaries. The company is sending feelers to potential buyers for selling hotel projects, they said.

Like many other realty companies, Parsvnath, too, had entered the hospitality sector when the real estate sector was booming. It aimed to build 100 hotels in seven years with an inventory of 10,000 rooms, as per company’s website. The website says the company has finalised 20 hotel and service apartment projects across the country under different star categories in standalone and mixed use model. The hotel projects at Hyderabad, Ahmedabad and Goa have received government approval and obtained five-star rating, while the project at Lucknow is rated four-star. The construction work has already begun on these projects, but lack of liquidity has held back much progress. The company has tied up with ITC’s subsidiary Fortune Park Hotels to manage its proposed 50 hotels, including these four properties. Parsvnath, as many other real estate firms, have put on hold construction on several residential, commercial, hotel and SEZ projects.

The company reported a 77% decline in profit to Rs 5.3 crore and 60% decline in net sales to Rs 85.74 crore during the quarter ended December 2008, amid a downturn in the real estate. The company has a total debt of Rs 1,800 crore on its balance sheet and has been seeking rescheduling of Rs 300-400 crore loan. It is expected to repay Rs 50-75 crore by March-end. Several real estate developers had entered hospitality sector in the past few years, but a cash crunch is forcing them to exit. “Some of the developers will continue to build hotels, while some have stalled construction and others are looking to exit,” said Cushman & Wakefield executive director (hospitality) Akshay Kulkarni.

Given the economic downturn and terror strikes that have slowed arrival of tourists and business travellers in India, the hospitality sector has started looking not so attractive. The occupancies and room rates have been falling in most cities impacting revenues of hotel companies.

News Published Under:   Hotel Industry in India |

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