Serviced Apartment as a Leased Property

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   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 fully furnished 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.

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.

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.

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.

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. The concept works best in business oriented 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.

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.

Serviced apartments provide a good option, both in terms of services as well as in terms of value for money. Increasing domestic leisure travel, where people/ families may prefer to rent apartments rather than stay at hotels, particularly at destinations. Opting for a serviced apartment makes sense when the comparative cost of a quality hotel room for an extended stay is prohibitive. It is a good option for international executives who shuttle between cities and require cost-effective short/medium/long-stay options, and for domestic business travellers shuttling internally between regional offices, say experts.

A VIABLE PROPOSITION?

It is certainly an option, though the returns on leasing it out would be lower than actually operating it on a business level. There are two main advantages of leasing out a serviced apartment. Firstly, it provides an incentive to maintain the house. Secondly, it does not lock the tenant into long-term stay and lead to unpleasant situations. However, you should spend considerable time/investments as the nature of operations is very different from an individual letting out.

Home Away from Home

Serviced apartments work best in business-oriented cities


• Quick Factss


• Serviced apartments are popular in metros and the larger tier-II cities, where starred hotels are overpriced

• They are 20% cheaper visà-vis hotels for long stays

• They are basically targeted at business and frequent travellers

• Service apartments offer a suitable 4-star serviced and facilities

• International executives
who need to shuttle between cities and require cost-effective short/medium/long-stay options should opt for serviced apartments


• How to position your property in the serviced apartment market?


• Engage a serviced apartment operator who can find potential clients and run the business for you

• Approach the admin/HR department of the companies in the neighbourhood

• Register on popular property websites which have a separate segment for listing serviced apartments

• Create an individual website, which would target a larger audience looking for serviced apartments


• Advantages of of leasing your property as a serviced apartment:


• It provides incentive to maintain the house

• It does not lock the tenant into long-term stay and thus helps avoid unpleasant situations like the tenant not vacating your property

 

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