Invest in serviced apartments to get higher rental incomes

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Mixing Home and Hospitality

There has been a sharp surge in business travel over the last few years with India becoming more integrated with the global economy. Executives from India and abroad frequently travel to business hubs and spend weeks and months working from different locations. Staying at hotels for such long periods is costly. Serviced apartments offer an alternative. For house owners, they serve as an alternative to giving their premises on rent.

TEMPORARY HOMES

A serviced apartment is a furnished accommodation with a small kitchen and rooms generally more spacious than in a hotel. It also has modern communication facilities such as telephone, fax and an Internet connection. Some also offer conference rooms, besides housekeeping staff and a concierge service.”The concept of serviced apartments arrived in India in 2003-04. Starting from Mumbai, Bangalore and Delhi, serviced apartments have extended their presence to smaller cities, driven by commercial activities,” says Anshuman Magazine, chairman and managing director, CB Richard Ellis South Asia.

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The main client base is the corporate sector. The demand is primarily driven by executives of multinational companies (MNCs) and expatriates who come to India on deputation for periods ranging from weeks to months. There is a huge demand for high-end serviced apartments in the National Capital Region (NCR), especially Gurgaon and South Delhi, due to the presence of a large number of MNCs.

A serviced apartment is a furnished accommodation with a small kitchen and rooms generally more spacious than in a hotel “Globalisation is resulting in an increasing number of expatriates coming to India for work. As the duration of their stay is assignment-based, it makes sense to take a serviced apartment on rent rather than staying in a hotel,” says SK Sayal, director and chief executive, Alpha G:Corp, a Gurgaon-based developer. The company has serviced apartment projects in Ahmedabad and Amritsar. These residences are owned and managed by the builder and not sold to individuals.

“Top serviced apartment brands are operated mainly by mainstream hotel chains which want to lower operating costs and reduce the staff/guest ratio. A number of international brands have developed serviced apartments with local developers in Delhi, Mumbai and Bangalore, catering largely to the corporate sector,” says Magazine. Leading hotel chains such as Hotel Leela Venture, Grand Hyatt and Marriott International run several serviced apartments in the country. Hilton Hotels plans to open its serviced residences in Bangalore in May 2012. Ascott, which says it is the worlds largest serviced residence owner-operator, has been expanding in Mumbai, Delhi and Pune to cash in on the opportunity offered by the demand-supply gap.

PROFESSIONAL LINK

Serviced apartments can become a popular option for generating higher rental income from value-added services when professional property management companies start offering services and finding guests.

“Top serviced apartment brands are operated mainly by hotel chains which want to lower operating costs.”
Anshuman Magazine
CMD, CB Richard
Ellis South Asia

“The sector does not have professional companies to run and manage serviced apartments owned by individuals. At present, some individuals who let out their houses as serviced apartments manage it themselves,” says Sanjay Sharma, managing director of Qubrex, a real estate consultancy and brokerage. At present, only local firms offer services for operating individual-owned apartments as fully serviced residences on a profit-sharing basis. Some firms such a IL&FS Property Management & Services manage properties without taking care of the operational aspects.

As India’s economy expands, the demand for serviced apartments will increase along with the floating population. These apartments can also become a preferred choice for those seeking a luxurious lifestyle. With demand rising, more developers will start offering facility management services, either directly or in collaboration with hospitality firms. “The concept will grow as India becomes more global and offers career opportunities on a par with the developed world,” says Alpha G:Corp’s Sayal. If you want to invest in real estate, it may be a good idea to diversify your exposure to serviced apartments for a higher annuity income than what residential apartments can give. Don’t forget to undertake a due diligence of the project before sealing the deal.