ABIL: Slow, Yet Steady

ABIL Group prefers a cautious approach to development projects, waiting for each to stabilise, before moving to the next one By Vinita Bhatia As a prudent developer, Amit Bhosale, MD, ABIL Group, feels it is better to err on the side of caution rather than get involved in too many projects that will put pressure on the company's finances. That explains why in the past year, it has been working on stabilising its existing properties like W Goa, St. Regis Mumbai, etc, by upgrading some facilities and changing some facets of its hotels. Bhosale has a reason for adopting this measured approach. "Our raw material remains real estate, and hotels are capital-intensive projects. Hence, I prefer to build one and let it stabilise as in their initial years, they require a lot of hand-holding," he explained. Often, a developer's costs are overrun because of delays in getting governmental approvals and towards the end of the project, the rate of interest is very high, which eats into the capital. By entering into a new project at that time, a developer can get into a vicious cycle of over-exposure of capital. LENDING SUPPORT Additionally, a hotel is unlikely to make profits immediately, while loans with interest have to be repaid from year one. "Often there is that deficit in the first year and a widening gap from year two onwards. Whatever budgets one plans is on the basis of certain market assumptions. But once you start the business, even the operator realises that he might have presumed some things that might not go as per plan. Then everyone regroups to re-strategise and plan," he elaborated for his reasons on why a hotel should be allowed to become stable before a developer moves to the next project. He added that even an operating hotel constantly needs some financial support, and if this is not extended, then its quality of service will deteriorate. Hence, it is important to give it the support required before moving to the next one, Bhosale noted. Even now, though the company has a large land parcel in Navi Mumbai, Bhosale is waiting for the international airport work to take off in earnest before opening the hotel there. "This year, we can finally talk to operators, sign contracts, start planning and bring consultants on board. Once we finalise everything, we can go for environment clearance and other sanctions, which means our construction can start only middle of next year," he said. This hotel is likely to be a 500-room property, which will take around four years to execute, since this will be a significantly large project. "It will be an upscale hotel, which will cater to the increased guest traffic that will result due to the upcoming airport. Additionally, Navi Mumbai is a growing market, with the proposed Trans-Harbour Link likely to come up by 2022, the area will witness a lot more economic activity. This is the captive audience that we are targeting," Bhosale added. He is also working towards a 65-room resort in the Maldives, and is in the process of identifying the right brand to partner with for both these projects. ABIL's business credo is clear - it won't let an urge for rapid growth override its decisions to maintain financial stability. It would rather set a slow development pace today, considering the consequences likely to occur tomorrow.