Investor's Bullish on Senior Housing in 2017

Today’s senior citizen generation is more educated and financially stable than their predecessors. They may have aged physically but they are young at heart. Senior living has recently become a desirable asset for many new and experienced investors. It is rapidly moving into the spotlight of real estate investing. Higher expectations from potential residents, encroaching competition and the ability for operators to efficiently adjust to a community’s greatest demand in the continuum of care are driving change in today’s senior living market. Despite the slowdown in real estate market in India, foreign developers are still bullish on investing in Indian property market.

In the senior living real estate sector, independent living is growing most quickly, most likely because it has the fewest regulatory and licensing barriers. Senior living also is experiencing "significant investment" and memory care units also are being added in independent living settings as well.

The changes in regulatory framework, India is now way more attractive to both global and Indian investors. Increased consolidation and transparency and the REITs (Real Estate Investment Trusts) launched this year brought further opportunities to the Indian Real Estate Sector. With RERA it further enforced unprecedented transparency and accountability requirements for developers into the system and increase consumer confidence.

Effect of RERA on Senior Communities:

• Senior communities are not extension of real estate, but it is assumed to be so by the Government. There are no separate building codes, rules and regulations for setting up and running these communities. Whatever rules are there, cater to the old age homes run by NGOs and not for retirement communities run by companies that cater to the huge Middle class segments.

• Senior communities have large Common Amenities component. This is because they need a building with Lounge, huge dining rooms, medical centre, Activity Centre, Therapeutic Pools, Activity Centre, Library, TV Room, essential staff quarters, Care components like assisted, memory and palliative.

• Some of these communities also cater to the needs of Special children (Autism, Down’s syndrome, Cerebral Palsy and Spastics, and these Persons with Disabilities (PWD) are looked after by the Management through a unique residential model after the demise of their parents until the demise of the PWD. In fact this is a Make in India concept, which is not available any where in the world. The residential model requires creation of hostels where the PWD are moved after the demise of their parents and looked after by Care Givers, the Management, surviving senior citizens who are parents of PWD. Senior citizens with such Special children need to pay more for themselves and the care of the PWD and, save additional money for the lifetime of PWD.

• In normal real estate, the common amenities are handed over to the Association or Society formed who run the day-to-day affairs of the residents while the developer exits. The Executive Committee of the Society maintains the accounts, ensures basic services and manages the building or the project. There are water-tight agreements signed by the Management and the residents including standard of services and care to be provided with safety and default clauses in favour of the residents.

• Please note that the Real Estate Developer/Management spends lot of money for creation of these facilities, look after the same and provides quality care and services as desired by the elders.

• In these communities with senior citizens, such an Association or Executive Committee as prevalent in real estate projects cannot provide the services and care for the senior citizens. Nor are the seniors interested in such activities, as they have come to live in peace and harmony in the twilight of their lives.

• Besides, the Services and Care are provided by the Service Providers who take up this segment simply because of their passion to serve the seniors and in so doing, earn their livelihood. There are proper agreements to protect the interests of the seniors and also of the service provider.

• For resolution of any dispute, the residents have a clear and time-tested redressal mechanism including a Resident Committee elected by them who interact with the management on any issue and find resolution.

• RERA does not address this segment of retirement communities. The registration of projects with the RERA Authorities for projects in pipeline or those under construction will not be possible in the present format.

• It may not be possible to change the concept of retirement communities (not old age homes by NGOs) to suit the rules of RERA, which are available for real estate projects today.

• A large number of developers and senior citizens would be affected unless the authorities address the concerns of such companies involved with retirement communities and elder care.

Effect of GST on Senior Communities in India:

• Before GST came into effect, senior citizens residing in retirement communities paid 15% as Service Tax for maintenance charges which were for the services provided by the company that created retirement communities. The service tax was towards provision of labour for various services provided like housekeeping, security, catering, gardening, medical staff, manager etc. as well as for maintenance of common amenities, which were utilized by the residents. The rates were as decided by the residents and the service provider mutually.

• No Service tax was charged for food.

• The above was in vogue since 2004 and has changed with the introduction of GST.

• Now, the elders are required to pay 18% as GST (an increase of 3%) for maintenance charges and also 5% or 12 % GST for catering. If the company providing catering has a turnover of below Rs 75 lacs, then 5% GST is applicable, but if it is more than Rs 75 lacs, they are to be charged 12%.

• Since senior communities have not been shown separately as a category, these rates have been taken as specified for others in the Services and Hospitality sector.

• These charges would on an average increase the expense of senior citizens by about Rs 600/ per head per month. Thus a senior couple would have to pay additional Rs 1200 per month.

• The differential rate for catering, based on the turnover of the company (5 or 12%) is simply not understood as the seniors are being charged more for no fault of theirs.

India had access of 100 million senior citizens aged 60 and above towards the end of 2014. This number is expected to double by 2030. By 2050, it is likely to reach approximately 320 million, constituting 20% of the country’s total population.

Buyers for senior living homes are self-sustaining retired/about-to-retire people (or in the age group of 50 and above), whose children reside away from them or outside India, or senior NRIs who are accustomed to such facilities in developed countries and are now returning to their home country. Research suggests that the demand for such senior homes is over three lakh units in urban centres. Presently, only 3,000 units are available in the market.

There are a number of projects being developed in the given domain. Ashiana housing has come up with a number of projects in Lavasa, Bhiwadi & Jaipur. Max India has launched Antara- a premium offering for senior citizens living in Dehradun, Uttarakhand. Tata Housing too entered this space with a senior living commune in Bengaluru titled Riva. Among the other companies that have such senior living projects include Covai in Bangalore, Chennai and Coimbatore and Athashree in Bangalore and Pune.

These housing projects have all general facilities plus some special features such as anti-skid tiles, concierge services, doctor on call etc. that can ensure a safe & convenient stay for older people. Other than that there are also other special features such as special fittings in bathroom and rooms for those who might be facing mobility issues.

Senior Housing are a great boon to elderly, to overcome the ‘empty nest’ syndrome and to enjoy the retirement years. Housing facilities for senior citizens is soon becoming the new normal. It is a gift that both generations can give to each other. Younger generation can be rest assured about their parent’s well-being and the older folk can live their life peacefully without being dependent on their children and curbing them from flying off in search of better avenues.

Senior living homes can either be rented or purchased. They are not only efficient and comfortable, but also cost-effective. Elderly can lead life on their own terms. No more being slaves to the fast-paced life. They can revel in an atmosphere that offers a sense of belonging. With smart cities becoming a new trend in the real estate, developers are also focusing on giving customised facilities and understand the demand of occupants in terms of understanding and improving quality of life for aging population. 

It is now a necessity to create cities that are aware of the special needs of their citizens which includes the aging population. These needs include medical support, pharmaceutical accessibility and travel facilities to name a few. Therefore, fulfilling these needs of the senior living will be booster for this segment. Therefore, by combining smart homes, smart technology, smart healthcare with smart cities, one will be able to provide the necessary infrastructure that exploits the entangled connections between assisted living, smart homes and smart cities.

There is no question that seniors housing is increasingly viewed by investors as a true investment grade asset class. The interest in seniors housing is evident in the spike in investment sales transactions over the past year for both seniors housing properties and nursing care facilities.

This guest post has been written by Gunjan Johar.