The Home Service Boom

THEY are homes away from home and could turn out to be real estate’s next boom. A cross between hotel rooms and homes, real estate management consultants are increasingly looking at service apartments to solve the housing crunch faced by corporate expatriates who have to make India a base from anything for a week to two years or more. Says David Fowler, general manager, Colliers & Jardine, the Boston-based real estate transnational: "In the next three years, I see between 5,000-8,000 service apartments coming up in India with Delhi as the thrust area with around 2,000."

Self-contained units with attached kitchenettes, the concept of service apartments was picked up in West Asia, Europe and North America in the ’70s. And now, it’s India’s turn: with economic liberalisation, the number of business travellers has increased and the expatriate is often unhappy with housing facilities. Says Neelima Chopra, partner at Tourism Futures, a tourism and related real estate consultancy: "There’s a dem-and for quality housing from expatriates which is not being met."

While the India Tourism Development Corporation’s (I T D C) Qutub Hotel in New Delhi is the solitary example of a hotel running a service apartment block in India from way back in 1974, the complex itself was taken over by the government by default. Constructed by U S A I D and handed over to the Indian Government when the agency left India in the ’70s, Dr Karan Singh acquired the three buildings in the complex for I T D C use. The hotel has since been renting out 30 service apartments and rates vary from Rs 1,00,000 to Rs 1,20,000 a month depending on an area of 1,400 sq ft or 1,800 sq ft. But most of the apartments have been rented out to big corporations who are running their offices in it, Daewoo Motors for one.

The latest  service apartment which went operational last year is The Residence of the K. Raheja group of hotels at Powai in Mumbai. It offers 100 apartments on rent, in two types— a double-room regular (550 sq ft) and a single-room studio (300 sq ft). Clients can also combine the two units for a three - room apartment. Says Indira Brito, general manager, sales and marketing: "Since we opened we have been surprised by the response. There ’s an average occupancy rate of 80 per cent." Interestingly, research at The Residence indicates that foreign male expats show more initiative in cooking their meals. Corporate Indians are content with making a cup of tea or coffee.

While tariffs vary from Rs 2,500 a day for the one-bedroom apartment and Rs 4,300 for the two-bedroom apartment, regular clients can avail of special rates. For these facilities: an attached kitchenette and bathroom, airconditioning, television and telephone with trunk dialling facilities. Says Jagdish Saigal, manager of The Residence: "The rooms have everything from sofa sets to work tables, shoe racks, dressing tables, refrigerators, cookers, cutlery, electric toasters, iron and ironing board and cookware. We make the beds daily but change the linen just twice a week. Maids are available for the kitchenette at an extra charge."

Guests unwilling to use the hotel laundry can wash clothes at a laundromat. Besides, there’s a restaurant and recreational area, safe deposit lockers and a business centre with secretarial services. Services in the offing include a fitness centre and a pool.

Says Michael Huber, a captain with Air Club which began operations in India last year and who stays at The Residence: "The apartment is spacious. We are not confined to a single room like in a hotel. We can also invite guests over for drinks and watch television in the living room. It’s not much different from home."

As the complex is near Sahar airport, more than 30 per cent of the clients are in the aviation business, with foreigners constituting 70 per cent of the clientele. The management also goes out of its way to be on a first -name basis with guests and try to accommodate feasible demands— it has just added more toilets for guests and the restaurant is being kept open 24 hours. Among the little softeners: a mixer and toaster griller available on demand.

IN fact, so great is the perceived demand for service apartments that no less than three agencies, Colliers & Jardine, Tourism Futures and Richard Ellis have conducted studies. Says Fowler: "Four international service apartment operators approached us to do feasibility studies of the Indian market. We charged each one of them $1,00,000. Nobody spends that kind of money on a wild goose chase." Fowler, himself an expatriate, has been two years in India, spending the initial six months at Hotel Imperial in Delhi. Says he: "The hotel has a lot of old world charm but wouldn’t qualify even as three-star material in, say, the US. Besides, a lot of the expats are being forced to stay in five-star hotels because no service apartments exist. Nobody wants to put on a suit before going to breakfast every morning for if you are not presentable you never know who you might run into."

What Fowler wants to exploit is the disparity between hotel rates and having to rent a house in the metropolises. Says he: "You don’t need a rocket scientist to figure that one out." Agrees Uttam Dave of Tourism Futures, whose study indicated that most expatriates in Delhi would prefer living in service apartments even if they had to pay 25 per cent more than their house rents. Says Dave: "Long-term guests at hotels are willing to pay between 60 per cent to 70 per cent of five-star prices for a service apartment complex of international standards. In Delhi itself our study found the need for 221 apartments."

The Tourism Futures study, which polled 100 decision-making corporate executives, 30 long-term hotel guests and 20 real estate agents, found high levels of dissatisfaction with the current accommodation. Says Chopra: "They were not happy with the utilities, the high brokerage, big advances and deposits and poor quality housing. Security was another big issue. Everybody wants a place where all these hassles are taken care of." While the average age of the expatriate is 40 years and above, more than 60 per cent of them are here with their families and more than 80 per cent are in for the long haul, to stay upwards of an year. The average stay, in fact, according to the study, was two years and nine months. High dissonance factors for long-term stays in hotels were constraints of space, monotony in food, the high costs and high formality levels.

Says John O’Brien,  product manager at Motorola who has been staying at the Hyatt Regency in Delhi for the last six months: "At the end of the day you just want to take off your shirt cuffs and relax. It’s better to stay in a service apartment and hunt a round for a house than stay in a hotel."

With the slight slump in real estate prices, it’s making sense for builders to consider service apartments. Says Dave: "Earlier, because of the high prices, builders were primarily interested in selling and getting out but now with prices bottoming out, it is making sense to them to make money on rentals. This is an emerging maturity in the market. They want to build and hold."

One big builder getting into this sector is the Ansal group. They are planning two complexes, one at Palam Vihar in Delhi, expected to come up in three years, and the other most likely at Saket where the group’s five-star hotel is coming up in collaboration with the international Marriot group of hotels. Says R. Gurumurti, associate general manager at Ansals: "As a group we have constructed service apartments in Bangkok. We are constructing two more in Vietnam and Myanmar. For us it’s been a logical diversification to look at the Indian market specially after we diversified into constructing clubs."

The other big building group eyeing the area is Unitech. Says G.R. Bahri, director: "We have existing condominiums in Gurgaon which can be converted into service apartments. The minimum block we will build is upwards of a 100 apartments. We also plan to tie up with a Canadian firm."

But while Tourism Futures conducted their study for the Calcutta-based Jalan group which is hunting for a site in Delhi’s Nizamuddin area, Fowler’s clients are looking to build 1,000 service apartments in Gurgaon. Says Fowler: "My clients are going to provide all the expertise, the blueprints and the name for 15 per cent of the gross turnover from the property."  Fowler estimates the apartments to come up at a cost of Rs 18 lakh each, minus the land costs. Says he. "They are going to be in blocks of 40 to 200 to make them financially viable."

More towards town are the planned luxury apartments in the vicinity of the Hyatt in Delhi. Says Umesh Saraf, managing director of the Madison group of hotels which, together with Hyatt, is building a hotel and the service apartments: "We are planning 70 units. But they are going to be targeted at the very top end of the market." Daily rates are likely to be above Rs 9,000 a day.  Another tie-up in the offing is between the Uppals and the Taj group of hotels.

The busy Indian traveller is praying for a boom. For though real estate agents are looking to the expat clientele to make a fortune, service apartments could solve many a worry for the metro-hopping Indian too.