Selecting new avenues

Select Hotels is venturing into the real estate business

Is real estate the next big thing in India? Arjun Sharma of Select Hotels, promoters of Sita World Travels which was sold to Kuoni in 2000 for nearly Rs 400 crore, definitely seems to think so.

Sharma has bet every penny made from that deal on a Rs 450-crore commercial project called Select Citywalk, in the heart of south Delhi. This six acre project will comprise retail space, office space, a multiplex and serviced apartments.

But what makes Select Citywalk different from the scores of malls coming up all over Delhi and the National Capital Region?

"We don't want to be a glass and concrete box-shaped building like all the others. Citywalk is a low-rise spread out area which retains the character of Delhi with balconies and colonnades," says Pranay Sinha, CEO, Select Infrastructure Pvt Ltd.

With 1.3 million square feet of developed area, Select Citywalk is one of the largest real estate development projects coming up in the country. It is a fast-track project and the promoters expect it to be open by early next year.

Besides the 4.6 lakh sq ft of retail space, the project has 32,000 sq ft of commercial space, around 80 serviced apartments, a six-screen multiplex which will be run by PVR and a 1,500-car park.

But is the design and structure of Select Citywalk the only distinguishing factor? "Our USP is our lease model. We are only leasing the retail space and not selling it. Hence, we can ensure we have the right tenant mix," says Sharma.

Sharma feels that though most malls have high footfalls, there are very few conversions. "There are always more hangers on as compared to serious shoppers," he says. This he feels discourages the real shoppers. "We intend to be a destination for real shoppers with few hangers on," he adds.

Select Citywalk plans to do so by getting its tenant mix right. For instance, fast food restaurants have been given a space only in the food court on the second floor. In most malls they are on the ground floor and attract young people who are there for fun and not for shopping.

"This is just one way to ensure the ground floor is left less cluttered for the serious shoppers," says Sinha, who was the head of retail at Jones Lang La Salle before joining Select. Also, only 10 per cent of the total retail space is being leased to restaurants.

This is much less than the other malls where nearly 20-30 per cent is dedicated to food. Moreover, by only leasing out the space, Select will ensure that there aren't too many retailers selling the same kind of thing, therefore eating into each others profits.

Select has entered into a turnover-based revenue model with the retailers. So instead of paying a certain sum as rent every month, they pay a percentage of their revenue.

"Hence it becomes important for us that the retailers make profits. Providing them with exclusivity helps," says Sinha. Already 58 per cent of the space has been leased out. Sharma says they will open only when 95 per cent of the space has been leased.

Unlike the retail space, the commercial space will be sold. "However, sale is by invitation only. After all, the kind of offices will have a bearing on the place," says Sharma.

The 80 serviced apartments are something close to Sharma's heart. "We are the first ones providing serviced apartments in south Delhi. There was a growing demand for such apartments as a large number of executives come to Delhi for short projects and don't want to stay in hotels," says Sharma.

So is Sharma moving out of hospitality? "Definitely not. We are simply bringing our hospitality experience to real estate. Hospitalityis still the mainstay," he says. Select Hotels' Goa and Manesar properties are being expanded while Sharma plans to open hotels in Chennai, Hyderabad and Bangalore.

And does he plan more Select Citywalks? "We don't want to build five shopping malls in the city. After all, there is only one Harrods. But we may try and replicate this model abroad," says Sharma.