Serviced Apartments in India : 20% Annual Yield on Investments

Serviced apartments are fast becoming a hot real estate avenue, with as much as a 12% to 19% annual yield on investments, against 10% to 12% returns in the commercial segment.

Experts say in the serviced apartments space, developers, primarily from the hospitality sector, are targeting non-resident Indians (NRIs), expatriates and now, even domestic investors. To investors, this segment offers both capital value appreciation, as well as rental returns.

Hotel Leela, Grand Hyatt & Marriott International are among the major hospitality chains with serviced apartments.

Ascott, one of the largest serviced residence owner-operator, has a tie-up with Ireo to offer such apartments in Gurgaon.

Now, the venture is expanding into other regions, too.

Many Gurgaon - based firms offer serviced apartments of various developers, including  DLF Ltd and Unitech, to companies & tourists.

Mr. Ashutosh Limaye, Head (Research and Real estate intelligence service), Jones Lang LaSalle India, says, “Of late, domestic investors, along with NRIs, are more keen to invest in serviced apartments, as the real estate segment - residential & commercial  - is not offering very good returns. It is possible the returns in the serviced apartments space are as high as 12% to 19%.”

He added the capital appreciation in the residential segment was 5 to 7% and less than 5% in the commercial space.

The residential segment offers 2.5% to 2.75% yields to investors, while the commercial space offers nearly 12%.

What is Serviced Apartments?

 

Serviced apartments are fully furnished studio or /  one -, two - or / three - BHK (bedroom, hall & kitchen) apartments, with the kitchen managed by the service operator.

The construction cost for like apartments is much higher than that for other residential apartments; typically, it is on a par with a 5 star hotel, in terms of amenities like meeting rooms, housekeeping, swimming pools & gyms.

Many multinational firms have serviced apartments as guest houses. Mr. Samir Jasuja, founder and chief executive, PropEquity, agrees serviced apartments are among the most promising options for investors.

 “The capital price appreciation &  the rental yield offered by a serviced apartment are typically higher than commercial and residential property. This segment offers ultra-luxury lifestyle, services & great opportunities for investors who look for both regular income & additional upsides.

Currently, this segment is receiving a lot of interest from NRIs & HNIs (high net worth individuals” Mr. Samir Jasuja says.

Serviced apartments are already a hit in the US, Europe and other developed markets.

An executive at a leading real estate developer says these are ideal for an extended stay by tourists, or / for employees relocated for assignments.

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