Professional Management

1. Professional Management Aligning Interests of Operators Investors and Developers and The Government of India’s Important Role Skip Conover Chairman, Bhavana Developers Pvt. Ltd. November 22, 2007 skip@bhavanadevelopers.com

2. Interesting Facts about the U.S. Hotel Industry USA India Properties: 47,135 1,899 Rooms: 4,389,443 107,392 Population: 301 Million 1.129 Billion Sales 2006: US$133.4 Billion Occupancy Rate: 63.3% Rooms Occupied/Night: 2,778,517 Total Hotel Rooms in the USA in 1900: 750,000 USA Population in 1900: 76.1 Million Sources: American Hotel & Lodging Association 2007 based on 2006 numbers. HVS Study 2005-2006

3. Rooms in Las Vegas, NV Hotels #1 MGM Grand 5,034 #4 Circus Circus 3,800 #5 Mandalay Bay 3,700 #8 Mirage 3,049 #9 Venetian 3,036 #10 Monte Carlo 3,014 #11 Bellagio 3,000 #26 Riviera 2,072 Total for only these 8 hotels: 26,705

4. Total 5-Star Rooms: India 19,935 Source: HVS Study 2005-06

5. Las Vegas: 136,000 Rooms India: 107,392 Source: HVS Study 2005-06

6. Population/Rooms USA 1900: 1 Room per 101 People USA 2006: 1 Room per 68 People India 2005-06: 1 Room per 10,512 People How many hotel rooms are right in a modern economy? How many rooms does India need to build? Source: American Hotel and Lodging Association 2007 and HVS Study 2005-06

7. In April 2007, a leading hotel chain in India estimated that the needed build out of hotel rooms in India for the next 5 years is 105,000 Rooms! 1. What do you think? 2. Who will do it? If that were accomplished, there would be 1 hotel room for every 5,256 Indians. Is that enough?

8. Issues Insufficient Funds from Indian Sources FDI’s Role in National Development Reliance on the Indian diaspora Transparency and Corporate Governance

9. Why Insufficient Funds? Mismatch among Needs, Assets, and GOI Policies GOI says India needs $320 Billion in roads, ports & bridges by 2012; meanwhile, major developers have raised only perhaps $20 Billion in 2007—and NOT for infrastructure India needs >$10 Trillion of RE Investment by 2020 FDI Rules—Lack of Commitment to FDI Generally GOI says only $1.1 Billion in FDI for RE 8/91 ~ 7/07 --Notwithstanding the big numbers in the press! Banking Regulations No loans for land, means only the privileged few can be developers when land prices are up to $2-5 million per acre.

10. The Indian Century

11. India Compared to other Economies Source: 2007 CIA World Factbook

12. Conover’s CorollarytoThe Doppler Effect Performance of Economies Must be Measured in the Context of Their Performance in the Global Economy National performance measured against its own prior results provides skewed results, which might be useful to politicians, but such measurement is of little use to understanding what needs to be done and it provides a false sense of security!

13. China’s Economy is RED SHIFTED as comparedto India’s!!! China is moving away economically! So is the UK and the USA! India’s economy in PPP (Purchasing Power Parity) is 40% of China’s At the current rate of growth, by 2017 it will be 36% of China’s; by 2117 it will be only 12% of China’s economy.

14. Problems with Purchasing Power Parity! --That’s an artificial construct comforting to economists and politicians, but of very little use to a peasant farmer living on $2 per day! --The actual per capita GDP spread is on the order of: --India--$670 --China--$2,000 --USA--$43,000 --When we take away the PPP, what shows up as the reason India is doing relatively well is that many commodities cost less in India than other countries, thereby skewing PPP results. --BUT, the Global Economy is tending to even out all pricing inefficiences, which means that the PPP advantage is going to evaporate! --Just consider what’s happening to IT companies to see the future in all commodities!!!

15. What is holding India back? The answer is plain and simple: Public Policy Failure to adequately recognize that India needs finance from FDI to quickly develop its infrastructure and bring its lifestyle into the 21st Century, not to mention keep the economy competitive and secure. Over reliance on the Indian diaspora. The revolt of Manhattan realtors!!! Analogy to the Spanish Monarchy and the Cazenovia Club Economic Hemophilia Wrong headed banking policies in real estate. Self-defeating FDI policies!

16. Understanding Orders of Magnitude

17. One Report Said $34 Billion FDI is coming to India for RE Sounds like a LOT of money! --BUT actual GOI statistics say that the total FDI into India 8/91 ~ 7/07 (Sixteen Years!)was $60.3 Billion, and only 2.25% of that was for Housing and RE Remember: FDI into China in the last ONE YEAR was $72 Billion!!! Meanwhile: 3,400 projects are underway in the Middle East at a total value of $2.4 trillion, a region where the population is only 25% of India’s

18. Orders of Magnitude(in US$ Billions)

19. When is that Indian Century Going to Begin?

20. So here we are at this big international conference on hotel investments! Look to your left and right, and decide for yourself whether this conference will accelerate FDI into India. Today is the American Thanksgiving Holiday! All of the top people in American investment banks are HOME WITH THEIR FAMILIES! Globally “sophisticated” players simply MUST get smarter about the Global Economy and what it means for your future!

21. Professional Management? Aligning the Interests of Operators, Investors and Developers means to me the necessity to properly and respectfully convey this message to the Government of India, so that the appropriate handcuffs can be removed from India’s Economy, before it is, quite frankly TOO LATE!

22. Thank Youfor your attentionto this critical matter forThe Indian Economy! Skip Conover Chairman Bhavana Developers Pvt. Ltd. skip@bhavanadevelopers.com +1-410-919-7571