"It'd get in the way of my designs." It's a very noble-ish answer, meant to snub and make it clear that pushing the subject idea will lead to animosities. On the other hand, it also opens an indirect 'tit for tat' possibility of handling this: if Hiei agrees to 'respect' Douman's business, Douman would be expected to show his 'gratitude' for the given courtesy in return.

"As the leader of the Hyakki Yagyo I prefer a peaceful, unsuspecting neighborhood."

He doesn't know if this little yet fierce spirit knows of the infamous Night Parade of a Hundred Demons. It's simply a little gamble, sprinkling in a big name in the hopes that it will provide further distraction from a confrontation. Douman doesn't mind fighting, but he dislikes going against unprepared opponents.