Investing in Service and Managed Apartments
By Evente Clinic
The new-age investors are looking for new and high return investment options. Investors have started investing in real estate again after a few years of slow down. Investors lately are very keen on investing in serviced apartments.
Serviced Apartment is the umbrella term for a type of furnished apartment available for short-term or long-term stays, which provides amenities, housekeeping and a range of services for guests and where most taxes and utilities are included within the rental price.
The sector is increasingly having an impact on leisure travel as people find serviced apartments are available all over the world as a credible and cost-effective alternative. They are especially economical for longer stays, group travel or family parties, allowing savings on dining out and offering in-house entertainment as well as allowing you to live like a local.
“They are especially economical for longer stays, group travel or family parties, allowing savings on dining out and offering in-house entertainment as well as allowing you to live like a local.”
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.
According to experts, if there has ever been a good time to invest in serviced apartments, it is now. The corporate travel market in Mumbai is growing rapidly and the growth is expected to accelerate. People are increasingly travelling inter-state for both, business and leisure and they are seeking long-term, cost-effective accommodation options.
These are some of the reasons that will make the investment worthwhile:
- Serviced apartments tend to offer larger, better value accommodation than a hotel with a range of amenities, innovative facilities and personalized services. For a regular traveller, these are a better option than costly hotels and unsafe low-cost hotels.
- Their proximity to business centers and good connectivity leads to a higher rental income and capital appreciation.
- They are ideal for business and leisure travellers for short- term or long -term stays and stands out as a cost-effective or budget-friendly accommodation with no compromise on services and facilities.
- Globalization leading to increased tourists and business travellers is expanding the demand for serviced apartments in India with a further growth potential immensely in the coming years.
- The excellent onsite facilities and management services provided at a lower price in comparison to hotels are making them the default choice with unrestricted access to facilities and amenities provided.
Several small-to mid-sized builders are marketing serviced apartments as an investment opportunity with returns in the range of 9-14 percent per annum. At present, investment in residential properties is more for capital appreciation than rental income.
Annual yield via rental income from a residential property is generally 3-4 percent a year, while capital appreciation is 10-15 percent. Like any property investment, location is important in this case too. Proximity to business centres and good connectivity will lead to higher rental income and capital appreciation. As the quality of service also decides the rental yield, the facility must be managed by a reputed service provider.
If you need our expert advice on service apartments as an investment option, please get in touch.