In India, hotel developers, brands turn to leasing in slowing deal market

While hotel transactions may be booming in some parts, elsewhere, they aren't as robust. Consider India, where The Economic Times writes that valuation mismatches are weakening hotel transactions, prompting developers to lease their assets in a bid to ensure some income. According to industry estimates, more than 80 hotels, across segments ranging from mid-market to luxury, are in the midst of pursuing this option. 

"In the absence of a buyer at the right price, the developer's second option could be to lease as there would be some flow of income," said Chintan Patel, partner, deal advisory for real estate and hospitality at KPMG India. "Some hotel brands are considering leasing as an option, with a revenue-share agreement, depending upon the kind of asset and the strategic location they want to be in." 

India's hospitality industry has yet to shrug off the effects of the economic slowdown, which has hurt both business and leisure travel. 

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As ET writes, though many owners wanted to sell their properties, they are unable to attract buyers at the prices they want.

"Leasing opens up capital in a slow market and the developer is satisfied that he still controls the asset and can sell it once the market picks up," said Abhijeet Umathe, associate director for hospitality and leisure at real-estate consultancy Knight Frank India. 

By leasing the asset, the owners can get a fixed annual income while the brands can establish their presence and scale up faster without putting in huge capital, ET writes.