Friday, July 15, 2011

Lease your second house as a serviced apartment

Did you know that your vacant apartment can earn some money for you and, that too without having to rent it out? Lot of people who buy residential property in other cities for the sake of investment are often wary of renting it out to some unknown tenants. The common fear is that the tenant may lock into a long-term contract and ultimately cause problems when asked to vacate the property. If this is what is keeping you from renting your property, then you can look at serviced apartments as an investment avenue.


A serviced apartment is often a fullyfurnished accommodation which is available for short-term or long-term stays. These apartments come with basic amenities for daily use, which include a kitchen with cooking range, kettle , microwave, a washing machine etc. If you don't want to cook or do the routine chores, you can even sign up for a complementary breakfast, laundry etc.

The concept of serviced apartments was started in the US and was adapted in India by the early 2000s, as more and more expatriates started to live in India for a medium-term period. The concept was easy to handle as India has a legacy of high-quality services and excellent hospitality. "Most obviously, the concept was implemented first in locations like Delhi, Mumbai, Bangalore and Chennai .

The market segmentation for the same is almost entirely corporate, who engage serviced apartments for their managerial staff and long-stay expatriates . Key demand drivers for service apartments are IT/ITeS, biotechnology, services sector, BFSI and medical tourism . Even while the concept of serviced apartments is well understood, the actual number of serviced apartments is fewer than the actual market potential in India," says Shveta Jain, director , Residential Services, India, Cushman & Wakefield .

Rising demand
"The concept of serviced apartments works very well in the metros and larger tier-II cities, where starred hotels are notoriously overpriced. Serviced apartments are the emerging trend in the corporate hospitality sector. Often, the executive traffic of many MNC and domestic companies is too erratic to justify a standalone company guesthouse," says Badal Yagnik, managing director, Chennai & Coimbatore , Jones Lang LaSalle India. Also, the needs of such business occupants are very different from those of the usual hotel occupants.

Serviced apartments, which invariably offer a suitable 4-star service and facilitation level, are the natural choice. "Serviced apartments offer business travellers facilities such as fully-equipped kitchens with self-catering facilities and various bedroom choices, and are far more costeffective than hotels in the vicinity of workplace hubs," Yagnik adds.

How to tap the right clients?
There are a number of operators whom you can engage to run a serviced apartment . This will help you to reach out to the right clients and improve the flow of customers and your business. "Economic viability can be achieved by engaging the services of an expert who can take away your headache of finding potential takers and run the business for you. The nature of operations and design, of course, are totally different for an individual to attain economic viability on his own.

Alternatively, an individual could market the serviced apartment by approaching the administration /human resources department of companies in the surrounding areas. Another marketing initiative could be the choice of various property websites which have a separate segment for listing service apartments. One can also create a website, which can target a larger audience looking for service apartments," Jain adds.

Location is key
With a booming economy and IT and ITeS sectors being in demand, a growing number of expat professionals are looking to oversee business operations in India. And this is exactly the fraternity that is pushing the growing demand for service apartments in India. "There is a good demand for well-run serviced apartments in India, particularly in the six major metros in India which can easily absorb the current supply of service apartments.

There is substantial potential for this market to grow, though the base is pretty small right now, particularly due to the services sector and increased penetration in not just primary, but secondary and tertiary markets as well," says Jain. "The concept works best in businessoriented cities. The best locations are in and around the city's CBD and SBD areas. Currently, India's highest demand and rate of development in serviced apartments is in Bangalore, Pune, Mumbai, Delhi, Chennai and Hyderabad," Yagnik adds.

Service apartments vs hotels
Serviced apartments are 20% cheaper vis-à-vis hotels for longer stays. Hence, many companies opt for serviced apartments for a medium-to-long-term stay for their employees. A company wanting to house a large number of its employees on a four-month training programme in a metropolitan city would opt for serviced apartments, as the cost of a star hotel would be prohibitive. Similarly, employers look at serviced apartments for expatriate relocation where the quality of housing is a key concern.

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