DECEMBER 26, 2006

Hospitality Lawyer Why were building hotels in India like crazy!

By Jim Butler and the Global Hospitality Group
Author of www.HotelLawBlog.com
26 December 2006
Hospitality Lawyer India. In a number of articles on www.HotelLawBlog.com, I have talked about the
exploding international hotel markets, including Mexico, Costa Rica, the Caribbean, Spain, Italy, London
Saudi Arabia, Dubai and China but particularly INDIA. Why are we building hotels in India? Why are
all of the brands and operators trying to stake out territory in India?
Its not hard to figure out. On December 23, 2006, the Los Angeles Times ran an article by Henry Chu
that summed it up pretty well. The headline read: India, a boom thats bursting at the seams. The
explosive growth in India is what has everyone scrambling to feed this hungry market.

Interest in international hotel development is hitting new highs.

International hotel development is surging. As I noted in my posting from the Phoenix Lodging
Conference, I was struck by how it seemed that talk of hotel development in China, India, Mexico and
Europe dominated so many conversations and conference presentations. Is this the beginning of new
era of hotel development outside the U.S.? And I talked about what a number of specific hotel
companies were doing in foreign markets.
Then, in mid November, 2006, I discussed the half billion dollar bet by Barry Sternlicht and Starwood
Capital in India hotel investments with Crillon, 1 Hotels and Residences and budget hotel chain,
Campanile.
Earlier this month I posted an article about What is fanning the condo hotel wild fire in Latin America,
the Caribbean, Europe, China, India and the Middle East? And www.HotelLawBlog.com experienced an
all time record number of visitors and page views!
So whats it all mean?
Explosive economic growth ignites unquenchable demand for hotel rooms.

Indias booming economy is projected to grow at 7.5% to 8.0% over 2006-2007. It grew 9.2%
last quarter compared with a year earlier. Multinational companies are flocking to India for a
piece of the action.

According to a 2005 Merrill Lynch & Co. report, commercial and residential construction in India
is expected to surge more than four fold from $12 billion in 2005 to more than $50 billion by
2010.

India is on track to capture 1% of the global trade in the near future. Merchandise export growth
of 24% per annum, on average, in the past four years points to the growing competitiveness of
Indian manufacturing.

According to some experts, while the US share in world GDP is expected to fall (from 21% to
18%), Indias s expected to rise (from 6% to 11% in 2025), and India may emerge as the third
pole in the global economy after the US and China.

According to the World Wealth Report, compiled by Merrill Lynch and Capgemini, the number
of individuals with net financial assets of more than $1 million grew by 6.5% to 8.7 million in
2005. The biggest increases in numbers of high net worth individuals is no longer just in the
United States but countries such as South Korea (up by 21.3% last year), India (19.3%) and
Russia (17.4%).

With a growing number of wealthy Indians as well as an expanding middle class, the number of
Indians traveling within the country has nearly doubled in the past decade to about 350 million,
according to the Indian Association of Tour Operators.

Foreign visitor numbers have nearly doubled over the past decade to just under 4 million. But
domestic travel accounts for most of the growth.

On December 4, 2006, the AP report by Ashok Sharma summed it all up in a headline:

Foreigners and newly affluent Indians are flocking to Indias big cities, but are finding a
shortage of places to stay. The subtitle was Need a hotel room in India? Better book early and
bring big bucks.

According to the October 2006 report by Stephen Rushmore, CEO and Founder of HVS
International, In addition, many Asian countries, especially China and India, are making huge
investments in infrastructure such as highways, airports and convention centers, which will
further encourage tourism, business and convention travel. In other words, it may be huge
now, but it is going to get much bigger.

The demand for hotel rooms is matching the skyrocketing economic growth.
Although there is a very intuitive connection between exploding economic growth in India and the need
for hotel rooms as commercial traffic builds to serve the burgeoning market, and wealthy individuals
expand their travels, there are many more objective indications of the dramatic need for more hotel
rooms.

India immediately needs another 100,000 rooms more than double the current amount
according to Lalit Suri, the chairman and managing director of Indias Bharat Hotels. He
estimated that would require investment of up to $17.4 billion.

At the current pace, India will fall far short of that projected need. A total of 300 hotel projects
have been approved by the government and are in varying stages of development, said
Amitabh Kant, a Tourism Ministry official. Most are likely to be completed in the next three
years and should increase capacity by about 75,000 rooms, he said.

Nearly half of the new projects are luxury hotels, and account for about $1.58 billion in
investment, said Subhash Goyal, chairman of the Indian Association of Tour Operators. He was
not able to provide figures for total investment in the hotel sector.

That means the current situation of high prices and low availability is expected to continue for
the foreseeable future, and worsen at around key events, such as the Commonwealth Games
in 2010 and the cricket World Cup in 2011.

Until a few years ago, hotel rooms were readily available in Indias big cities and a night in the top
establishments tended to run in the $50 to $60 range. But Indias hotel industry has simply failed to
keep up with the countrys hectic economic growth, averaging about 8 percent a year. Over the past
decade, the total number of hotel rooms in all categories a figure that includes everything from filthy
hostels to opulent resorts has only grown 10 percent to about 92,000. Thats lifted the price of a night
in a five-star hotel, which international business travelers tend to use, to an average $325, according to
the tour operators association.
Will the rush to build hotels over-saturate the market anytime soon? It seems like we have barely
scratched the surface of the demand and need in India and China. Some international markets may
approach saturation on 5-star product, but that seems some time off in India. And, in any event, the
development opportunity for mid-market product has plenty of room to go.
Whos doing what in India?
In an effort to encourage foreign investment, the Indian government changed its restrictive laws in
February 2005, to allow 100% foreign direct investment to develop new housing, commercial
properties, hotels and hospitals. Foreign investors arent allowed to buy buildings already standing or
undeveloped land. India also allows foreign funds to own stakes of as much as 24% in the nations
publicly traded real estate companies.
Indian hospitality space is pretty attractive with a major shortage of rooms in commercial centers like
Delhi, Mumbai, Bangalore and Hyderabad. The hospitality industry has grown at 23.7% in 2005-06. The
all-India occupancy mark too touched the 70.8% mark for the first time, while there is a severe demandsupply imbalance in cities like Hyderabad, Jaipur and Bangalore. The room tariffs have also been on a
rise.
Foreign hotel operators are eager to invest in India, helped by changes in Indian law in recent years
that allow full foreign ownership of hotels. So who are some of the players focusing on India now?
Heres just a sampling of current interest by the hotel industry:
Barry Sternlicht and Starwood Capital
Barry Sternlichts Starwood Capital Group announced on November 14, 2006, that it would invest up to
$500 million in India over the next 3 years to promote its Crillon, 1 Hotels and Residences, and

Campanile brands. Starwood was reportedly in talks to buy its first property for $50 million with the
purchase to be completed by the end of March 2007. Sternlicht says that there is so much demand
that he is targeting an average annual return of 20% on investments in India. Overwhelming
demand allows you to differentiate your product and probably sell it through any cycle of the economy.
Rising incomes, easy financing and population growth are driving housing demand as the economy
expands 8 percent a year, the fastest after China. Thats why Starwood announced a couple of days
ago that it had opened an office in Mumbai, Indias financial capital, and aims to increase the number of
employees to 20 from four by the end of next year. Starwood will consider investments in any Indian
city with two million to three million people, Sternlicht said. Delhi and Mumbai are the frothiest at the
moment. The company will initially focus on developing residential projects, followed by hotels and
office space, Sternlicht said. Residential has the greatest demand, he said.
Four Seasons
The timing is excellent, said Scott Woroch, a senior vice president of Canadas Four Seasons Hotels
and Resorts, which plans to open its first hotel next year in Mumbai in a partnership with the Indias
Magnus Hotel group. There is a growing demand with respect to international visits to key urban and
resort destinations, he said.
Four Seasons is also looking at a number of opportunities in New Delhi and Bangalore and are
studying possibilities in Goa to the south, and Rajasthan in the northwest, he said.
Sheraton Group
The Sheraton Group is collaborating with the Indian Tobacco Company in running 10 luxury hotels
across the country for more than a decade and is also looking to expand.
We believe that India has very strong growth potential, across all our brands, said Hwee Peng Yeo, a
spokesman for Starwood Asia Pacific Hotels & Resorts Pvt. Ltd, part of the Sheraton Group.
India Hospitality
One firm, the London-based India Hospitality Corp., has raised $100 million to build or acquire mid-level
hotels in India, said the companys chief executive, Jason Ader. Ader says his company views Indias
hotel industry as high-growth but fragmented, offering profit potential among the most attractive in the
world.
The non-luxury market has been overlooked by major Indian players like Taj Hotels, Resorts and
Palaces and Oberoi Group, Ader said. He declined to name the Indian companies his group was
negotiating with for collaboration, but said he expects to firm up plans by early 2007.

Local hotel chains have not been aggressive about growing, Ader said. IHC will be able to use its
expertise in management and finance to make its plans work, and the $100 million it raised shows
shareholders are confident that its strategy will deliver, he said.
Gupta Group and Hillwood
On December 15, 2006, it was announced that The Gupta Group, which runs five-star hotels in such
Indian cities as Delhi, Mumbai and Kolkata under the Hyatt brand, has formed a new joint venture
company with U.S.-based real estate company Hillwood that will develop three hotels.
In the joint venture firm Hillwood would have an equity share of 24.9%, while Gupta Group, which is the
developer of Choice Hotels, Asian Hotels and Edenpark Hotels, would hold the remaining share. Innova
would initially develop three 150-room Clarion hotels in Bangalore, Pune and NCR. Land for
development of these properties has already been identified or purchased. The Gupta Group is also
looking for more sites in Chennai, Mumbai and Jaipur, India.
Accor
Accor Asia Pacific Chairman, David Baffsky, recently said that the company had plans to open more
than 5,000 rooms in India over the next five years. Less than a month ago, Accor announced several
partnerships to develop a spectrum of hotel product in emerging markets, particularly in India. A
partnership with Dubai-based EMAAR plans to invest more than US$300 million to develop 100 budget
Formule 1 Hotels in India
In addition, Accor and its joint-venture partner InterGlobe are also developing a network of Ibis hotels
around the country. By the end of 2007, Accor and InterGlobe expect to have up to 15 Ibis hotels (2,700
rooms) under development, for a total investment of US$ 180 million.
Accor also plans to expand its Novotel brand in India with one Novotel presently under construction in
Gurgaon, a business precinct of New Delhi. Accor is in discussion with leading Indian business groups
for a variety of developments, including the launch of the Mercure brand in India.
And at the upper-upscale end of the spectrum, Accor has announced two Sofitel developments one
a U.S.$106 million Sofitel Mumbai with approximately 300 rooms being developed by a joint venture
comprising Accor and prominent local developer, Naman Developers Limited. A second Sofitel and
Accors first resort property in India is being built in Goa. Accor will manage the Sofitel Cabo de
Rama, which is being developed by Uniworth Resorts, a member of the JB Group of Hong Kong. The
resort is located on the oceanfront adjacent to the historic Cabo de Rama fort and will feature 260
rooms and a spa and is scheduled to open in 2009.
Announcing Accors ambitious expansion plans in India, Accor Chief Executive Officer, Gilles Pelisson
said: India is one of the worlds most dynamic economies, with rapidly growing inbound, outbound and
domestic travel sectors that we hope Accors development strategy will cater for. Accor sees the

investment play as attractive for both the inbound and outbound traffic to the rest of its worldwide
system.
Trump
On December 5, 2006, while in Dubai, Donald Trump, Jr. in a keynote address to delegates at the
worlds largest international property investment and development event, Cityscape Dubai 2006. was
joined at Cityscape by his sister Ivanka and brother Eric. The three have been charged by their real
estate legend father Donald Trump with taking the American brand overseas. As well as the Middle
East, they are currently eyeing India, the focus of a special session at the Cityscape Dubai Conference,
and Russia.
How do we make successful foreign hotel investments to take advantage of these exciting
opportunities for international hotel development?
Not surprisingly, great opportunities are usually accompanied by great challenges. That is certainly true
for international hotel investment, whether in India, or any of the other hot markets we have been
discussing.
Skyrocketing land and construction prices are just the tip of the iceberg. US investors will find many of
the bureaucratic rules, infrastructure limitations, arcane business practices, corruption, and the difficulty
of doing business to be frustratingeven with a local partner. And local partners will find the hesitations
and concerns of foreign investors equally challenging to deal with. But the rewards can be so great, that
there will be many attempts to harvest the riches promised by these exciting markets. Some will
succeed and other will not.
What will separate the successful from the failures, aside from luck? I will talk about how we make
successful foreign hotel investments in an upcoming posting in the near future.
________________________
Our Perspective. We represent developers, owners and lenders. We have helped our clients as
business and legal advisors on more than $50 billion of hotel transactions, involving more than 1,000
properties all over the world. For more information, please contact Jim
Butler at jbutler@jmbm.com or 310.201.3526.
Jim Butler is one of the top hotel lawyers in the world. GOOGLE hotel lawyer or hotel mixed-use or
condo hotel lawyer and you will see why.
Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim
leads JMBMs Global Hospitality Group a team of 50 seasoned professionals with more than $50
billion of hotel transactional experience, involving more than 1,000 properties located around the globe.

Jim and his team are more than just great hotel lawyers. They are also hospitality consultants and
business advisors. They are deal makers. They can help find the right operator or capital provider. They
know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow
of capital with their legal skill, hospitality industry knowledge and ability to find the right fit for all parts
of the capital stack. Because they are part of the very fabric of the hotel industry, they are able to help
clients identify key business goals, assemble the right team, strategize the approach to optimize value
and then get the deal done.
Jim is frequently quoted as an expert on hotel issues by national and industry publications such as The
New York Times, The Wall Street Journal, Los Angeles Times, Forbes, BusinessWeek, and Hotel
Business. A frequent author and speaker, Jims books, articles and many expert panel presentations
cover topics reflecting his practice, including hotel and hotel-mixed use investment and development,
negotiating, re-negotiating or terminating hotel management agreements, acquisition and sale of
hospitality properties, hotel finance, complex joint venture and entity structure matters, workouts, as
well as many operating and strategic issues.
Jim Butler is a Founding Partner of Jeffer, Mangels, Butler & Marmaro LLP and he is Chairman of the
firms Global Hospitality Group. If you would like to discuss any hospitality or condo hotel matters, Jim
would like to hear from you. Contact him at jbutler@jmbm.com or 310.201.3526. For his views on
current industry issues, visit www.HotelLawBlog.com.

High rise only way to go for Delhi: Kamal Nath

TNN | Sep 25, 2012, 01.47AM IST

Union urban development minister Kamal Nath on Monday injected a sense of urgency into the entire process of review of the citys
master plan by insisting that vertical development was the only way to go.

NEW DELHI: Union urban development minister Kamal Nath on Monday injected a
sense of urgency into the entire process of review of the city's master plan by insisting
that vertical development was the only way to go and that "planning has to be driven by
market forces". Speaking at a Delhi Development Authority (DDA) workshop on 'Review
of Master Plan of Delhi 2021', he said if there were no high-rises, slums would proliferate
in the city.
That the infrastructure is groaning under the weight of increasing numbers and quality
of life deteriorating in the cramped lanes of once upmarket colonies didn't seem to weigh
too much on the minister's mind. That power and water are scarce - Dwarka is a stark
example - also doesn't seem to be a deterrent in this skyward thrust. A reality check
would have shown that such concerns had put a question mark over even the third floor
approved under the master plan. The matter is still in court.
Experts have also pointed out that Delhi is located in Seismic Zone IV and underlined
that only through risk assessment studies and a development plan which has a mix of
high and low-rise buildings can the city survive.
The minister's business-like approach, however, seems to have put the entire process on
the fast track. It's likely to be finalized much before the December deadline. Sources said
lieutenant-governor Tejendra Khanna has asked officials dealing with people's
suggestions and objections to submit a draft with latest inclusions by October 15. The
final plan is likely to be announced before Diwali. That the government is likely to allow
more floor area ratio (FAR) for larger properties will cheer developers and owners of big
plots.

The workshop was also attended by urban development secretary Sudhir Krishna, DDA
vice-chairman S K Srivastava and Delhi Urban Arts Commission (DUAC) chairperson
Raj Rewal.
About the urban mess, Kamal Nath said, "It is not necessarily bad enforcement, it is bad
planning...What will you enforce? How can you enforce (in) 1,600 irregular colonies?
Tell me who is going to enforce? Perhaps we are the only country in the world which had
to bring in a legislation, Delhi Special Laws, saying we were going to regularize. What is
this a tribute to? It is a tribute to bad planning."
The minister said the concept of National Capital Region had increased the load on the
capital with people living here, working in NCR and vice-versa. "Why should we not have
high-rises? If we don't have it, we make it a city of slums. Where is the choice?" he said.
He said everyone wanted large open spaces but the ground realities had to be factored in.
DUAC chief Raj Rewal, however, sounded a note of caution. He said highrise
development should be site-specific, citing examples of government proposals for Kidwai
Nagar and Srinivaspuri as instances where vertical growth did not work. He also referred
to a proposal for highrise development adjacent to Vishwavidyalaya Metro station.
DUAC had serious objections and rejected all three proposals.
Architects and urban planners pointed out that the master plan was notified five years
ago but DDA had not carried out any assessment of the effectiveness of the new policies.
"Considering that Delhi has a shortage of land, vertical growth is probably the way out.
But vertical growth cannot be applied to the whole of Delhi equally. Risk assessment
studies are required to establish which areas are suitable for high-rises. These studies
will help establish the development framework for plots where height norms will be
eased," said Professor Sanjukta Bhaduri of the department of urban planning of School
of Planning and Architecture.
"There should be a mix of low-rise and high-rise with correct norms for high-rise
development so that it works for the city," added Paromita Roy, senior consultant,
UTTIPEC. "Vertical growth will not work in every area of Delhi, especially in narrow
lanes. It should be site-specific and need-based," stressed architect and urban planner
Sudhir Vohra.
MCD's chief town planner, Shamsher Singh, felt Delhi was not equipped for vertical
growth in the present scenario. "Vertical growth will put pressure on essential
infrastructure like water, roads and other civic amenities. For instance, high-rises cannot
be allowed in lanes and congested areas. Moreover, since Delhi is in Seismic Zone IV, it
is essential to develop buildings which are earthquake resistant," he said.
Earlier in the day, the LG defended the controversial farmhouse policy saying these areas
should be seen as green lungs of the city. Delhi has about 2,500 farmhouses. Khanna
said there was a view that by regularizing farmhouses, the government was losing 6,0007,000 acres which could be used for urbanization. He said the government can collect

charges and the farmhouse owners have to maintain the greenery. Khanna said in areas
like Chhattarpur, where ground water availability is quite less, no more capacity should
be added.
However, UD secretary Sudhir Krishna said that only a powerful few living in
farmhouses and Lutyens' Zone had control over huge land while the poor and the middle
class have to look for housing in NCR cities. "In the garb of many good intentions and
logic, Delhi is increasingly becoming a city of haves and have-nots in perpetuity. I have
never seen such a city where a large section has no access to housing," he added.

LAND USE PLANNING

Emphasis on mixed use needed

Our organically grown urban areas are very close to being the ideal mixed-land-use
places that the West is now attempting to create. To leverage this phenomenon,
there must be incentives to encourage development in the inner cities instead of in
sprawling suburbs, writes Madhav Pai.
6

Write to the Author

Cities
23 June 2006 The three buzz phrases one hears from contemporary land-use planners in the
United States are 'mixed-use', 'infill' and 'transit-oriented development'. What do
these buzz words mean and how are they important to planners and citizens in the
cancerously growing Indian metros?
Through the 50s, rapid urbanization in American cities led to overcrowding in
central areas of cities. The increasing affordability of the automobile, accompanied
by general deterioration in the standard of living in these areas, gave birth to
suburbia - more and more people began to move to huge homes in the outskirts of
cities. As a result, over the last 20 years the inner cities have deteriorated in parallel
with growing suburbanisation. Homgenisation of land uses, over-reliance on the
automobile, continued traffic congestion, and social isolation are all serious
problems today. To fight these problems, millions of dollars of are being invested
in research and in offering subsidies to create mixed land-use neighbourhoods in
central areas of cities.
Mixed-use developments - history and potential

The current American generation that has grown up in suburbia does not know
anything different. Once an entire generation grows up in homogenous
environments like these, it takes two more to change behaviour. Changing these
attitudes is something American planners are struggling to achieve. Mixed-use
developments, which combine several uses on one site in a coordinated way,
including office, retail, hotel, or residential development, are seen as an important
part of any solution.

Small shops like these are often mixed in with offices and housing in many
neighbourhoods.
Over the years mixed land use has efficiently responded to the diverse and
evolving needs of Indian urbanism. The images here show a vegetable vendor, a
fruit vendor, a general provisions store, and two restaurants adjacent to each other.
A quick look around tells me there's a barber, dry cleaner, pharmacy, stationery
shop, meat store, bakery in the 100-metre vicinity and you can see all your day-today needs are serviced within a quarter kilometre radius. If one member of the
household works within the neighbourhood and it has a good school, majority of
the household's travel can be accomplished on foot. To think people around the
world are breaking their heads and investing huge amounts of capital to create
exactly this!
When a zone or neighbourhood is identified as a mixed-use area,
there is a high risk that lawless development of the most
profitable land uses will result, and the mix that is sought will be
lost altogether.
Walk on the road, legally
Lessons in urbanisation
Making motorists pay

Legally or not, we have managed to create extremely efficient

mixed-land-use neighbourhoods; indeed, our organically grown
urban areas are very close to being the ideal mixed-land-use
places that the West is now attempting to create. We need to
leverage this phenomenon, not destroy it.
These neighbourhoods, however, are not pedestrian-friendly at all. Most people
shop here due to habit. The increasing availability of a motor vehicle means they
can avoid an encounter with manholes, overflowing drains, parked motorcycles
and other dangers by driving to a distant mall. To prevent that from happening, it
is essential to create a space where walking to complete errands becomes a
pleasurable activity in itself. This will also encourage book stores, video libraries
and other retailers to arrive.
But a great deal of caution is needed, especially when urban spaces are as poorly
regulated as in the Indian metros. When a zone or neighbourhood is identified as a
mixed-use area, there is a high risk that lawless development of the most profitable
land uses will result, and the 'mix' that is sought will be lost altogether. To avoid
this, jurisdictions should adopt specific mixed-use zoning ordinances to permit this
development. Appropriate clauses need to be adopted in the ordinances to specify
the percentage distribution of different types of land uses within each zone. Citizen
participation in this process will help immensely as well.
Infill and TOD
Let me now talk about two specific kinds of mixed-use developments, infill
developments and transit oriented developments (TOD). These are locationspecific mixed-use developments.
Infill development refers to redeveloping older inner city land as mixed use
developments. The armed forces, for instance, own substantial land in the
rapidly growing cities of Bangalore and Pune, and the land owned by
Bombay Port Trust in Mumbai is similarly large. In addition, old businesses
and factories add up to even more prime real estate ready for redevelopment
in these cities.
Transit-oriented development (TOD) refers to mixed-use neighbourhoods
that are built around transit or public transport stops. These are often of
higher density, on a walkable scale, and with a mix of uses. It is very
encouraging to see that our administrators perceive public transportation as a

solution to the growing traffic problems. However, it is important to

understand the importance of land-use planning to fully realise the potential
of mass public transportation systems like Bus Rapid Transit or the Metro. It
is imperative to develop station areas as transit-oriented developments. A
well designed TOD means no land-use should be further than a 15-minute
walk, or half a mile, from the transit station. This aspect of planning hasn't
quiet sunk in. Lack of station area planning is the biggest reason the 10,000
crore Delhi metro project has 10 lakh fewer riders than projected.
Hard choices
For land developers, the ease of acquiring land in areas outside city limits, the
lower costs, economies of scale that can result from humongous housing
complexes, all translate into huge profit margins. The cost of redeveloping inner
city properties is much higher. Thus, there must be incentives to encourage better
development in the cities, rather than in the distant suburbs. In such developments,
particular attention needs to be paid to pedestrian mobility, and dissuade people
from using their vehicles. A simple starting point is to develop pedestrian
circulation plans for neighbourhoods around the city, or to mandate the
development of a city-wide pedestrian plan as a part of the Comprehensive
Development Plans (CDP) of the cities. This will help identify the volume of
deficiencies for pedestrian movements.
Citizens too can begin to influence some of these decisions. From making
informed decisions on our choice of homes, to building small citizen groups to
ensure the walkability of our neighbourhoods, we can influence decision makers
and planners in our own small ways. Patronage of retail stores within walking
distance of homes and offices will also help bring this about naturally. The slightly
higher costs of low-volume retailers are easily offset by the health and community
benefits from mixed use.

Mixed-use realty development in vogue now

Experts say mixed use will be the future of buildings as retail is becoming
more organised, and FDI in multi-brand retail may be allowed
Dilasha Seth & Raghavendra Kamath | New Delhi
Ads by Google

As real estate in India goes vertical, developers are focusing in a big way on mixeduse development. Experts call it the need and future of real estate in the country
with land being a scarce resource. Internationally, mixed use development has been
quite popular for long.
Back home, Supertech has Supernova in Noida, a mixed-use development building,
and is planning to come up with more. The first three floors will be commercial and
thereafter residential. Multiplex major PVR has acquired space already. Talks are on
with MNCs who are interested in buying space in office building right next. We have
sold 600 units of the total 1,500 residential units, said R K Arora, CMD, Supertech.
Amrapali Group is developing two such buildings in Indirapuram (Ghaziabad, UP),
Manesar (Haryana) and Indore (Madhya Pradesh), which will cater to retail and
residential both. We have five per cent space for retail as residents do not want too
much of chaos or noise, where they reside, said Anil Kumar Sharma, CMD,
Amarapali Group.
Similarly, in Mumbai, the Phoenix Mills is developing mixed use projects in Pune,
Mumbai, Bangalore and Chennai, after the success of its High Street Phoenix project
in South Mumbai.

In Lower Parel, Mumbai, Phoenix has a hotel on top of a mall. In Kurla, Mumbai, it has
a mall on the lower floors and office on the top.
While these projects have malls, which will provide steady cashflows to the company,
Phoenix Mills is selling offices to repay the debt in each of the project. Bangalore and
Chennai projects also have residential components, which give additional cashflows
to the company. However, the company has put its hotel plans in these projects on
hold, given the slowdown in the market.
Hiranandani Developers is another group which is developing mixed use projects in
Panvel near Mumbai and in Chennai. It has already developed two such projects in
Powai in Mumbai and Thane in Maharashtra which have residential complexes,
offices and a hotel.
NCR-based R G Group is looking at opportunities to build mixed used buildings.
Things are in pipeline right now. Mixed-use buildings are surely the future of the
country, said Aman Gupta, executive director, R G Group.
As retail is becoming more organised, and FDI in multi-brand retail may be allowed
sometime soon, mixed use will be the future of buildings in India, say experts.
Mixed-use development is taking place primarily in large townships where office,
retail, housing and commercial projects are coming up. It reduces the risk for the
developers, explained Samir Jasuja, founder and chief executive officer at PropEquity.
That is, if one segment is not doing well, the developer can focus on other segments.
Once the whole township is developed, which can take 10-15 years, developers can
command significant premium over sales and leases, Jasuja said. While investors can
expect higher return, end users get the convenience, he added.
Land will be a problem in the coming years, therefore mixed-use buildings and
going vertical is the way out for efficient use of land, said Saloni Nangia, president,
Technopak. Technopak also noted that traffic problems can also ease out with such
buildings, with shops being right below the residential buildings.
Consultants say mixed use projects are becoming popular due to easy financial
closure and use perspective.
These projects are becoming popular among multi-national corporate occupants as
mixed use complexes will have food courts, night clubs, and serviced apartments.
They think it is best tool for employee retention," said Raja Kaushal, BNP Paribas Real
Estate and Infrastructure Advisory.

However, R R Singh, director general National Real Estate Development Council, said
in India we do not need mixed use development buildings as the culture is not
balanced, unlike developed countries. How can you accommodate lower income
groups in these mixed-use buildings. They do not go to malls, he asked. He said in
India, we already have shops in the residential colonies for daily-use items and do
not need separate buildings for the same.

Hospitality Law
Nov 10, 2008
In This Issue

Manatt Rolls Out its Latest Strategic Partnership

Sustainable DevelopmentWhy Hospitality Developers Are Going Green
Manatt Rolls Out its Latest Strategic Partnership
Timi A. Hallem
Michael Polentz
The hotel industry survived the savings and loan crisis in the late 1980s, and it will survive the subprime lending
crisis and implosion of Wall Street as well. But, not every borrower, owner, operator or lender will survive these
difficult economic times. The key is to be agile enough to be one of the survivors.
Recognizing the need to work with clients not only to ensure long-term survival, but also to capitalize on new
opportunities as they arise, Manatt, Phelps & Phillips, LLP, is pleased to announce the creation of its latest
strategic partnership. The attorneys in Manatts Hospitality Practice Group and the consultants at
Warnick+Company remember the lessons of previous industry downturns, have experience in restructuring,
repositioning, and quick, creative response garnered during years of responding to the challenges and
opportunities that resulted from the RTC, FIRREA, and that $480 billion1 bailout.
To give our clients maximum benefit from Manatts and Warnicks collective experiences, Manatt and Warnick
have teamed up to give lenders, borrowers, owners, operators and investors comprehensive business and legal
strategies for highly leveraged assets that are not making pro-forma or cannot repay their loans.
Manatts and Warnicks strategic team has the ability to answer all of the complex questions and assist its clients
in understanding and evaluating the intricacies and implications of the answers: Is it a market problem? Is it a
brand or management problem? Is more time the answer? Do you need to restructure your debt? Do you need to
file bankruptcy? Do you need to find an angel? Do you need to replace management? How long do you wait
before you decide that a loan cannot be worked out? How do you protect or perfect your interest? How do you
survive, when many will not?
To quote a radio commentator from the 1970s, At times like these, it is important to remember that there have
always been times like these.

New York Times, July 13, 1996.

For additional information on this issue, contact:

Timi A. Hallem Ms. Hallems expertise focuses on all areas of real property and land use, including hospitality,
commercial, industrial, residential, public/private development and mixed-use projects. Her practice covers all
aspects of real property and hotel ownership and development, including acquisition, entitlement, development,
financing, leasing and disposition.
Michael Polentz Mr. Polentzs practice focuses on leasing, acquisition, disposition, financing, land use,
development, construction, operation and business and commercial law for hospitality, commercial, industrial,
residential, public/private development and mixed-use projects.
back to

top

Sustainable DevelopmentWhy Hospitality Developers Are Going Green

Matthew A. Dombroski
Like many other sectors of the economy, the hospitality industry is in the midst of an increased focus on
environmentally sound development and operation practices. A confluence of many conditions has contributed to
this focus, including ever-increasing energy costs, the preferences of environmentally aware guests (a growing

segment of the population), lower costs associated with the ever-expanding range of green materials and
construction methods, and the establishment of government requirements and incentive programs for
environmentally sustainable developments and operations. As a result of these various forces, green hospitality
development is best thought of not as admirable but costly, but instead as a pragmatic (and still admirable) way
to reap valuable economic dividends.
The most traditional means by which going green in the hospitality industry yields economic benefits is via
efficiency gains and associated cost savings. A now-ubiquitous example is the practice of inviting guests to reuse
their towels in order to save energy and water. While there is certainly nothing wrong with this well-established
practice (except that it is sometimes cynically viewed as greenwashing for those operations that do not otherwise
prioritize environmental goals), many more (and more sophisticated) products and processes have been
developed to promote green goals, including energy control systems that enable the operation of HVAC and
other guest room systems only when the rooms key card is inserted into a wall-mounted slot, water recycling
systems that enable the reuse of the vast majority of water used for laundry purposes (leading to potential
conservation of tens of millions of gallons of water each year), and solar-powered water-heating systems that
save both energy and associated greenhouse gas emissions, among other innovations. Other low-hanging fruit
includes low-flow showerheads, energy efficient lighting solutions, and consideration of the types (and production
life cycle) of foods/ingredients, cleaning products, and groundskeeping methods employed by the operator.
Not only do these innovations yield efficiency gains and direct cost savings, but they may also garner federal and
(in some cases) state tax incentives. For example, on October 3, 2008, the Energy Efficient Commercial Building
Tax Deduction and the Solar Investment Tax Credit were renewed as part of the Emergency Economic
Stabilization Act of 2008. Many of the innovations discussed above, as well as many other green approaches
employed by the hospitality industry, may qualify for both of these tax incentives, along with many other tax
incentive programs at all levels of government.
In addition to (and in conjunction with) green innovations and tax incentives, much of the environmental focus in
the hospitality industry has been on the LEED (Leadership in Energy and Environmental Design) Green Building
Rating System, a voluntary standard to evaluate and certify green building design, construction, and operation.
The LEED standard, first established in 1998, is administered by the U.S. Green Building Council (the USGBC is
a nonprofit organization focused on sustainability in the design, construction, and operation of buildings) and has
developed into the nationally accepted standard. Notably, the federal General Services Administration found the
LEED system to be preferable to competing green rating systems, which is significant because the federal
government is a major owner and operator of commercial buildings.
The LEED standard covers new commercial construction, major renovation projects, interior renovation projects,
and existing building operations. While there currently exists no hospitality-specific LEED standard, hotels may
seek certification under the more general LEED standards described above. The LEED system provides a
framework for evaluating new and existing development projects and awarding one of four levels of LEED
certificationCertified, Silver, Gold, or Platinumbased on the number of points awarded for attaining
various green benchmarks, including with respect to water efficiency, energy use and conservation, and indoor
environmental quality, among others. The benefits of LEED certification are many and continue to grow. LEED
certification serves as reliable evidence to guests/customers, the media, investors, government entities, and the
public at large that your hotel has the green characteristics that you are claiming. This can generate increased
positive interest in your project from these same persons.
Although LEED certification triggers eligibility for many federal and state tax incentives, in some instances, LEED
certification is not optional. For example, California, Illinois, Michigan, and New York, among others, require
certain state-owned buildings to achieve LEED certification. These laws may impact hotel development projects
that involve public funding or the lease of government-owned property for hospitality projects. Finally, green
innovations incentivized by LEED certification are also inherently valuable in that they promote more efficient use
of fuel, water, and other materials. As these green technologies mature, and as more are developed, they gain a
greater foothold in the marketplace, are cheaper to produce, and are an even better investment.
After a hotel has expended effort in achieving LEED compliance and/or engaging in other efforts to minimize
environmental impact, one final consideration is how to ensure that the hotel reaps the greatest possible reward.
As mentioned above, materials and energy reduction reap obvious economic benefits, as do the various tax

incentives that may be available. But another consideration is creating goodwill and generating interest in your
operation by communicating your efforts to your guests and the public at large. This includes not only traditional
advertising, but also instructing your staff on how to speak knowledgeably with guests regarding your
environmental initiatives, as well as other means of communicating to your guests that you are indeed a good
environmental citizen.
While some question the viability of sustainable development practices in an industry that is already taking
significant adverse economic hits, looking long term, as we are so often forced to do, there is no doubt that
green is here to stay.
- See more at: http://www.manatt.com/Hospitality-Law/HospitalityLaw@manatt2.aspx#sthash.sv1c9980.dpuf

Cities Need More Mixed-Use

Developments
madan/ 2 yrs ago /

What is mixed-use development? The word may sound like a jargon for most of us
here, though it is a common phenomenon in many countries such as Malaysia,
Singapore and China.

In India, mixed-use development is yet to gain momentum. It is an integrated

complex, which houses office, housing, entertainment places like malls, hotels and
cinema halls, indoor stadium etc. This all-in-one factor makes the complex complete
in itself, as people dont have to go out for purchasing items or commute long
distances to their offices.

The mixed-use developments have sections like retail, shopping, entertainment and
residential accommodation to give a cosmopolitan feel to the place. The fast phase
of development also reduces the risk faced by developers over their investments.
Developers make full use of floor space index (FSI) factor while designing the entire
set-up. Choosing an ideal location also plays a vital role for the success of such
developments.

Over the years, mixed-used developments have evolved to increase the practicality
of the projects. As Indias residential and office markets are witnessing buoyant
growth, developers are trying innovative ways to provide best possible housing with
high standard of living for the residents. Integrated townships, green buildings,
mixed-use developments are testimony to peoples urge for quality living.

Having offices and hotels within housing complexes increase the viability of the
project and decrease the risk by utilizing the available FSI optimally.

How Successful are Mixed Use Developments?

Mixed-use developments have been successful in many countries abroad. These

developments provide an attractive proposition for retailers and other components of
the commercial real estate. In countries like Malaysia, Singapore and major cities in
China, the model has attained huge success in both metro and tier I cities.
Due to the changing retail scenario, the response for such projects in tier II cities has
been encouraging.

However, in India cities like Bangalore, Pune, Chennai, Ahmadabad, and in some
pockets of Delhi-NCR the mixed-use developments are successful. However, one
cannot expect such projects in Mumbai due to lack of land.

There are a lot of advantages for retailers from the mixed use developments. In
some cases, mixed-use developments can also help decrease the base rental and
increase revenue for developers who operate on a revenue share model and they
generate a wholesome social fabric and create destination developments.

However, there is also a flipside for mixed-use developments. If the customer flow is
not properly planned and there is lack of parking space, then a mixed-use project
can become a failure.

People-oriented Cities: Mixed-use development

creates social and economic benefits
By Luis Zamorano and Erika Kulpa

July 23, 2014

15 Comments

Mixed-use development combined with pedestrianization on Mexico Citys Calle Madero promotes
sustainable, prosperous communities. Photo by Julius Reque/Flickr.

The People-oriented Cities series exclusive to TheCityFix and Insights is an exploration of

how cities can grow to become more sustainable and livable through transit-oriented
development (TOD). The nine-part series will address different urban design techniques and
trends that reorient cities around people rather than cars.
Atlanta, Georgia was recently announced the most sprawling city in the United States, coming as
no surprise to many as it has long been recognized as an international symbol of urban
development practices that contribute to car-centric growth. Residential suburbs are segregated
from the city center, where jobs and opportunities are concentrated. These land use patterns
contribute to traffic congestion and air pollution and make it difficult for public transport to serve

the extremely dispersed population. Together, these adverse impacts are costing city residents
and compromising quality of life. Congestion alone costs the region USD 3 billion in lost
productivity and fuel costs per year, and its rising air pollution landed it the dubious honor of
being named Americas Most Toxic City.
Travel to New York City and the landscape is much different. A single city block houses a mix of
restaurants, office buildings, residences, and shops. This type of development known as
mixed-use development makes it easy to use public transport, walk, or bike, helping to
efficiently connect the citys neighborhoods through sustainable transport. The portion of
commuters relying on cars in the city fell from 90% to 59% between 2010 and 2011.
These two cities showcase an emerging urban design lesson: Sprawling cities decrease quality
of life; compact, mixed-use developments yield economic and social benefits.

Sprawling and segregated: The cost of disconnected cities

The proliferation of zoning at the beginning of the 20th century contributed to sprawling cities
around the world. Residential neighborhoods sprouted on the urban periphery and in suburbs,
giving rise to car-dependent commuter towns. City centers languished, shopping malls replaced
commercial streets, and the urban poor were segregated from the wealthy elite.
These sprawling cities are increasingly common in developing nations. For example,
Mexicos history of dispersion created thousands of single-family houses on the outskirts of cities.
The sheer distance to everyday destinations means some families spend 25% of their income on
transport. This type of design increased Mexico Citys greenhouse gas (GHG) emissions by up
to 70% and costs USD 2.5 billion (33 billion pesos) each year in lost economic productivity.

Connected communities improve health, environment, and economies

Mixed-use development works against these trends to create inclusive, connected communities.
In mixed-use areas, you can find housing, restaurants, services, schools, cultural facilities, parks,
and more. This connectivity reduces the need for private vehicles, thus increasing the viability
of public transport, walking, and bicycling. For example, Mexico Citys longest street, Avenida
Insurgentes, is home to a range of services, residences, and businesses, but traffic congestion
initially made the street difficult to access. For these reasons, Insurgentes was chosen as the site
for the citys first bus rapid transit (BRT) system, Metrobs. After the launch of Metrobs in
2005, 100,000 daily car trips were replaced by sustainable transport, easing congestion and
reducing the citys GHG emissions by hundreds of thousands of tons. Its a powerful example of
how mixed-use development supports and attracts sustainable transport, bringing significant
benefits for urbanites.

Everyday needs should be close enough to residential neighborhoods that they can be reached by
walking, bicycling, or public transport. Graphic by EMBARQ.

By reducing the need for vehicle travel, mixed-use development also brings shared community
space. Plazas, parks, and sidewalks foster interaction among community members interaction
that wouldnt be safe or possible under a sprawled, car-centric design model.
One landmark study of San Francisco compared three neighborhoods identical except for the
levels of vehicle traffic on their streets. It revealed that residents of the neighborhood with the
lowest level of car traffic had three times as many friends and twice as many acquaintances as
their more heavily trafficked counterparts.
Finally, mixed-use, public transit-friendly neighborhoods benefit local economies. They save
individuals money on transportation by reducing the length and number of everyday trips and
eliminating the need for car ownership. Mixed-use development also supports local businesses
by increasing foot traffic. Transport for London found that pedestrians spend up to 60% more
money at businesses each month than those traveling by car, while spending less on
transportation. Combining mixed-use development with pedestrianization reinforces these
benefits.

Human-scale neighborhoods encourage different activities and social interaction, recreating the
streets and sidewalks as viable public spaces. Graphic by EMBARQ.

Growing cities can win with sustainable, mixed-use development

According to the World Health Organization, cities will hold 70% of the worlds population by
2050. About 96%of this growth will occur in developing countries, demanding quality urban
spaces and services.
As current cities expand and new ones crop up, its important for local leaders, urban planners,
and citizens to examine what works. Compact, car-light cities spur economic growth, social
cohesion, and quality of life.
Stay tuned for the next entry in the People-oriented Cities series, which will address the role of
vehicle demand management in effective transit-oriented development. For more on the transitoriented development paradigm, download EMBARQs Transit-oriented Development Guide for
Urban Communities.