Topics In Demand
Notification
New

No notification found.

Healthcare real estate: The need of the hour
Healthcare real estate: The need of the hour

1769

0

The COVID-19 outbreak has exposed the vulnerability of healthcare systems, even in developed countries. The state of affairs in countries like India, is even more disconcerting. While several advanced countries such as South Korea and Japan have 12-13 beds per 1,000 people, the ratio for India is merely 0.5 bed per 1,000 population. This is much less in comparison with countries like Chile and Colombia.

In India, the hospital industry, accounting for 80% of the total healthcare market, is witnessing considerable investor demand from both, global and domestic investors. The hospital industry is expected to reach USD 132 billion by 2023 from USD 61.8 billion in 2017, growing at a CAGR of 16%-17%.

What is healthcare real estate?

Globally, healthcare real estate represents a niche segment within the broad spectrum of the real estate industry. In the developed world, healthcare real estate comprises buildings, offices and campuses leased to medical service providers or institutions related to the healthcare community. These buildings can be owned by hospital groups or private or public third-party groups.

In the west, there is a rising trend among hospitals, healthcare systems and medical practitioners, to opt for leasehold properties that are owned and managed by third parties. By using third-party developers, they can preserve their capital resources for their core business needs and focus their attention on healthcare services, while passing on the responsibility of maintenance and compliances related to the built structure.

There are many NYSE-listed healthcare REITs, with market cap ranging from USD 3 billion to USD 30 billion. These healthcare real estate investment trusts (REITs) own and manage various healthcare-related buildings, which are given on lease to its occupiers. Healthcare REITs’ property types include senior living facilities, hospitals, medical office buildings and skilled nursing facilities. There are about 17 such listed REITs, generating returns of 9%-10%.

Healthcare real estate segment in India

In India, developers have shied away from the healthcare sector by and large, except for a few cases where they have developed hospitals for a philanthropic cause. Indian developers were primarily focused on the residential sector and some of the top-end developers have ventured into office, retail and hospitality spaces. In the past few years, interest has built up towards logistics, industrial and data centres as asset classes. However, the nuances and the dynamics of the healthcare sector are still beyond the comprehensions of the developer community.

To put it in perspective, the top six healthcare chains like Apollo Hospitals, Fortis Healthcare, Max India, Healthcare Global (HCG), Shalby and Narayana Hrudayalaya (NH) reported combined revenue of Rs 27 billion in FY 2019. Out of the operating expenses, most of the significant brands spend around 18%-20% on doctors, while other costs, including housekeeping and maintenance, were in the range of 15%-25%. The rental part was around 10%-12% of the top line, which could be a significant sum for anyone who owns and leases the real estate asset.

Developing a ‘Core and Shell’ for a healthcare building and leasing it to a competent operator, is not that difficult. However, conceptualising the design and various technicalities, while keeping local demand in mind, is the key for a successful partnership. It is high time the developers fulfilled their part of social responsibility by developing basic infrastructure properly, which is also commercially viable.

The government of India has announced a credit guarantee of Rs 50,000 crores, for setting up private hospitals. There are domestic and international operators looking at expanding their footprint. Moreover, the nation is in dire need of augmenting its healthcare service in a big way.

Subhankar Mitra, Colliers India

- Subhankar Mitra, Managing Director - Valuation and Advisory Services, Colliers India

Subhankar Mitra heads Advisory business in Colliers International India. He has over 23 years of experience pertaining to Strategic Consulting, Market Research, Transaction advisory, Program Management, valuations and other Urban development related Studies. 

For more information, please visit: 

https://www.colliers.com/en-in/experts/subhankar-mitra 

https://www.colliers.com/en-in 

https://www.linkedin.com/company/colliers/

 


That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.


images
Colliers India
Sukanya Dasgupta, Head Marketing and Communications - sukanya.dasgupta@colliers.com

Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 66 countries, our 18,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 28 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders. With annual revenues of $4.5 billion and $98 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors, and our people. Learn more at corporate.colliers.com, Twitter @Colliers or LinkedIn.

© Copyright nasscom. All Rights Reserved.