Builders See Rate Settling at Twice DDA’s Reserve Price of Rs900 Cr

The Delhi Development Authority (DDA) has set aside a whopping reserve price of Rs900 crore for builders bidding for the right to build, operate and maintain a 12,000-seat international convention centre and hotel proposed near the airport in the fast-growing Dwarka area of southwest Delhi.

“Wouldn’t be surprised if it actually goes for double” the reserve price, said Siddharth Thaker, associate director at the Indian unit of HVS International Inc., a global hospitality consulting firm. Land for “a 500-bedroom hotel would go for Rs650 crore” in the Delhi area, he added. The convention and exhibition centre, which would be built on the edge of a proposed golf course, would be India’s largest.

The recently released tender document will in all likelihood draw strong interest from builders because convention and exhibition organizers now have few options in Delhi, according to analysts. A strong incentive for developers is that the convention centre will likely direct a steady flow of business to the 800-room hospitality complex, including a five-star hotel and commercial development that would also rise from the 35-acre site—which at the reserve price would stack up to Rs25.7 croreper acre.

“There will be a lot of interest from developers, especially the hotel component,” said Shubhendu Saha, senior manager, investment advisory, for real-estate advisory firm DTZ. “There will be a synergy between the convention centre and the hotel. Those who come to the conventions will prefer to occupy the hotels for one or two nights.”

Developers also would benefit from a five-year income-tax holiday for convention centres and mid-range hotels built in the Delhi area before the 2010 Commonwealth Games, as announced in the Union Budget.

“It is one of the hot properties that everybody would be eyeing,” said Arvind Parakh, CEO of Omaxe Ltd, which has not decided whether to put in a bid. “It will attract a lot of bids. And I’m sure the pricing will be very high.”

The meetings, incentives, conventions and exhibitions market is the fastest growing in the tourism industry and Delhi has about 30% of this segment in the Indian market, according to the DDA, which expects the convention centre to spark an expansion of the market.

Such “convention” tourism provides 20-25% of inbound visitors to more developed markets, compared with about 5% in India, said Subhash Goyal, president of the Indian Association of Tour Operators.

Foreign tourist traffic to India was 4.4 million in 2006, according to the ministry of tourism. India’s economy received more than Rs29,600 crore in foreign-exchange revenues from tourism in 2006. That’s a gain of 17.6% over 2005.

“It’s a great project,” said Manish Uppal, managing director of Uppal Group, a Delhi-based developer that is considering a bid. “We don’t have a convention centre where we can accommodate 5,000 people. In a city like Delhi—at the speed we’re growing—we’ve got to have it.”

Hyderabad’s HITEX Exhibition Centre, occupying 100 acres, is currently considered one of India’s premier convention centres. But if the winning bidders for the DDA property have their way, that position will soon be occupied by the Dwarka centre.