Why these Delhi hotels are losing crores every month

Police department is not providing security clearance to hotels in Delhi Aerocity, due to their proximity to airport runway. Hotels such as The Lemon Tree Premier and Red Fox, which are ready to open since December, are losing a combined Rs 20 lakh a day.

The 287-room Lemon Tree Premier hotel at Delhi's Indira Gandhi International Airport features a dramatic view of planes landing and taking off, but it has no guests to see them.

The hotel - one of 12 built or planned next to India's busiest airport at a cost totalling more than $2 billion - has been unable to open as it awaits security clearance from police worried about its proximity to an active runway.

The cluster of hotels known as Aerocity, on a site bigger than 40 American football fields, was approved by the government six years ago.

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India is eager to attract foreign investment to revive economic growth that is stalling at a decade low and help plug a current account deficit that has widened to a record.

Yet bureaucratic hurdles including a lack of coordination among authorities still plague big-ticket projects, such as the hotel development at the capital's showpiece $3 billion airport.

"On the one hand the prime minister wants to drive investment into the country, the finance minister is travelling halfway around the world to get investment, but on the other hand these things spoil the country's reputation," said Rahul Pandit, CEO of Lemon Tree Hotels.

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The Lemon Tree Premier and 208-room Red Fox have been ready to open since late December and are losing a combined Rs 20 lakh (Rs 2 million) a day, said Pandit of Lemon Tree, which is backed by US private equity firm Warburg Pincus.

A property under French giant Accor SA's Ibis brand, which does not face the runway, has been ready for more than a month, its developer said.

A swanky JW Marriott hotel, operated by Marriott International Inc, is due to open this month, according to its website.

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The 43-acre Aerocity site owned by Delhi International Airport Ltd (DIAL) - a consortium led by GMR Infrastructure Ltd and including the Airports Authority of India, Germany's Fraport and Malaysia Airports Holdings Berhad - sits about 400 metres from the runway. Between the runway and the hotels lies an aircraft taxiway.

In 2007, the government approved plans to develop 12 hotels with about 5,500 rooms on the site, making it the largest hotel project in the country, in hopes of being ready for the 2010 Commonwealth Games, an event that was plagued by corruption scandals and missed deadlines.

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In 2011, the police called for a security review, saying its proximity to one of the runways at India's largest airport makes it a potential launchpad for militant attacks.

"This is a huge setback for investment coming in the country," said Uttam Dave, CEO of InterGlobe Enterprises, which is investing Rs 1,200 crore (Rs 12 billion) to build three airport hotels under Accor's Ibis, Novotel and Pullman brands.

DIAL's stance is that before leasing the land to developers it had the necessary approvals and police clearance was not required, a source at the airport operator said, declining to be identified because of the sensitivity of the matter.

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Negotiations between the airport, police and hotel operators are ongoing and a solution is expected soon, said a separate source directly involved in the talks.

The airport operator and police officials declined to comment.

Asked how soon he expects the security issue to be resolved, Lemon Tree's Pandit said: "I don't know. We are hoping within this month. It could be longer but this is what we have been hoping every month since January."

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Bullet-Proof Glass?

Given security concerns, police had initially said none of the 30,000 construction workers on the project could work before their identities were verified but later backtracked because of the magnitude and cost of the task, said a source involved in the process.

At the Ibis, construction on five floors is complete and work is ongoing on the remaining two, said Naresh Chandel, a security supervisor at the hotel.

Although only 354 rooms of a planned 464 are ready, InterGlobe's Dave said it can still open for business while the remaining work goes on.

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Other hotels planned on the site include Andaz by Hyatt Hotels Corp, Aloft by Starwood Hotels & Resorts Worldwide, Holiday Inn by InterContinental Hotels Group and a Dusit D2 hotel.

Hotel owners and operators fear they will be forced to make costly structural and cosmetic changes to the buildings before they are allowed to open for business.

"Why are we being singled out when you have slums, hotels and residential colonies surrounding airports in other parts of the country?" said InterGlobe's Dave.

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At the airport in Mumbai, India's financial capital, slums have encroached onto airport property, abutting a runway.

One suggestion by the police in Delhi is to place bullet-proof glass or film on the windows. However, Dave said this would only protect the people inside the hotel but would not prevent anyone shooting from within the hotel.

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Another suggestion is to build a wall as high as the hotels to prevent any direct view of planes from the buildings.

Developers say that when the hotels were under construction no one raised any objection. Construction has continued in the hope that authorities reach a resolution soon.

"The issue is if there is a gun held to our head then we will have to do what is being said," said Lemon Tree's Pandit. "We just hope that what is being said is doable."