The Covid situation has challenged hotel valuers with several predicaments. In Mumbai, the cap rate for luxury hotels were 6% in the summer of 2019. Now, during the summer 2020, the valuation is considered to be at its bottom. The excess risk in the cap rate is priced as 150 bps. Market analysts predict that the future NOI will stabilize at a slightly lower level in two years. However, compared to today, the risk perception afterwards is fairly optimistic. The market cap rates will spring back to 2019 levels. However, the risk associated with the ageing in property is priced at 50 bps.

What will be the going-out cap rate?

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