Coming of age

Lakshmi Ayakannu is a sprightly 73-year-old with an infectious smile and a love for conversation that helps her make friends easily. Of late, people have been turning to her not just for a quick chat but golfing tips. “Champion”, as Ayakannu’s friends call her, doesn’t tee off at the links, nor does she have a caddie or a set of clubs — she plays in one of the four small, cemented “golf courses” at Aarogya Kudumbam, a senior citizens’ retirement community about 17 km from Coimbatore in Tamil Nadu. Ayakannu picked up the sport last year as a change from playing scrabble, chess and darts with the other residents of the complex. Set up in 2008, Aarogya Kudumbam is a 10-acre property with 18 cottages where 34 men and women, all above 55, have moved to spend their post-retirement years. Run by PC Raju, a former doctor and himself a senior citizen, it provides facilities such as round-the-clock medical attention, yoga lessons, a library, cafeteria, housekeeping and, of course, golf. It is also a perfect example of how the market for senior living is growing and promises to be a serious business opportunity.

A place of their own- Graphic

Aarogya Kudumbam is one of several retirement communities that have sprung up all over India in the past few years (see: A place of their own). And they are to be found not only in Coimbatore, Bengaluru and Pune — traditionally considered retiree havens — but also in Goa, Kolkata, Punjab and  Bhopal. There are about 30 such projects (many with multiple complexes) across India catering to upper middle class retirees who believe there’s no reason the good life should end just because they have reached their golden years and, according to a report by Jones Lang Lasalle (JLL), another 30 are in the pipeline. So, what makes this business so attractive?

Golden opportunity

As with any emerging business in India, the biggest plus is the volume, either existing or potential. The senior living business is no different, thanks to the changing dynamics of Indian society and demographics. Although India is considered a young country, it also has 76 million people above the age of 60, and the expectation is that this number will soar to 173 million by 2025 (see: Silver lining). Until even a few years ago, there was social stigma attached to people moving into senior living projects, but that is fast reducing, particularly among the urban upper middle class, which is the target customer group for most of these projects. These are older people who are well-travelled, well-read, relatively affluent and many with children settled outside India — those in the sector hold that the trend for setting up such projects started in south India, when the exodus of software engineers to the US in the 1990s left ageing parents back home without support. And thanks to the increasing prevalence of nuclear families, a significant chunk of this age group will be empty nesters in the years to come — they will be staying separately from their children, even if they are in the same city. Globally, senior living is a $25-billion industry; the US alone has over 2,000 senior housing projects with about 500,000 residents. Given the coming explosion in India’s senior citizen numbers, the opportunity in this space will only grow in the years to come.

Silver lining - Graphic

Where does the opportunity lie? Not in providing old age homes for destitute senior citizens nor in assisted living for older people who need constant care — those are very niche businesses still to take off in India. Rather, the space to watch out for is creating communities for active, upmarket older individuals who want to retain their independence yet live in a set-up that caters to their need for practical help, security and companionship. “We estimate the current demand for senior housing in India at about 300,000 units,” says Deepak Bhavsar, managing director, JLL, whose report on the sector says there are just 5,000 units available across major projects in India.

Developers are queueing up to fill the gap. In the next six months, Paranjape Schemes, a Pune-based Rs 2,000-crore group that has five senior living projects under the Athashri banner that together house 1,500 seniors, will launch projects in Hyderabad and Baroda, with others in Chennai and Coimbatore scheduled to be announced before that; there’s already a 1,000-unit project underway at Pune. At the other end of the country, Antara Senior Living, a subsidiary company of the Analjit Singh-promoted Max India, is investing Rs 515 crore in a project in Dehradun that will have 217 apartments spread over 820,000 sq ft. Covai Senior Care Construction, which has completed three senior housing projects in Coimbatore and one in Puducherry under the Serene Retirement Communities brand, accounting for over 400 villas, has four more underway in Coimbatore, Puducherry, Chennai and Bengaluru, with 1,300 villas and apartments. Impact Senior Living has a 53-unit project coming up in Amritsar; RakIndo Senior Living is working on a 250-unit complex in Coimbatore; while Bahri Estates is developing 198 villas in Kodaikanal. And Ashiana Housing, which has completed senior living projects in Bhiwadi and Jaipur, is now working on the next one at Lavasa. “We are also looking at newer markets in Andhra Pradesh and Tamil Nadu. Our experience has been that customers are willing to pay a premium if the right facilities are offered,” says Ankur Gupta, joint managing director, Ashiana Housing.

"There is a clear business proposition here [senior living], but it has to be done with passion" - Shashank Paranjape, managing director, Paranjape Schemes

But it’s not an easy business, warns Shashank Paranjape, managing director, Paranjape Schemes. “Yes, there is a clear business proposition here, but it has to be done with passion. It can’t be treated like just another construction,” he says.

"For every hundred people who make enquiries, barely four or five make the final investment" - PB Anand, CEO, Covai Senior Care Construction

That’s a thought echoed by PB Anand, director and CEO, Covai Senior Care Construction. For every 100 people in the 55-plus age group who make enquiries, barely four or five make the investment, he says. “This is really the last big investment that a senior citizen is likely to make,” he points out in understanding but adds, “There is a healthy payback in the business.” Indeed, both Anand and Gupta of Ashiana point to returns of between 25% and 30% on their senior living projects.

Frills needed

Senior housing projects are usually located on the periphery of a big city (keeping real estate costs low), spread over a larger area, and usually single or two-storeyed structures with more space devoted to community activities and common areas. Paranjape estimates that the cost of construction of a senior living project is at least 30% higher than a premium residential project. Construction extras include wider passageways that can accommodate wheelchairs if needed, hand rails in the bathroom, ramps for easy outside access and anti-skid flooring. Typically, such projects also have larger common areas, including a dining area, library, specialised gym and in some cases, common laundry and medical care facilities. 

Recreation facilities that don’t involve high levels of physical activity (usually seated pastimes such as scrabble, carrom, cards etc.), golf carts for moving around, a temple and transportation facilities for going into town are usually par for the course. Most complexes include only kitchenettes for basic heating of beverages etc., and meals and housekeeping are provided in the package — that means a senior living facility also employs more staff than a regular housing complex. All of which adds to the cost of such projects.

Not surprisingly, developers in the senior living space have a very clear target customer in mind for their projects. While some local developers open their doors only for specific communities, for those above a certain age, without certain illnesses, or with dietary restrictions, there’s a common thread tying them with big developers — senior living projects in India are mainly geared towards relatively well-off older individuals. (The really big developers are yet to enter this space. But existing players in the senior living space believe it’s only a matter of time: as the sector picks up steam and large developers sort out their current problems with high debt and inventories, they will turn their attention to senior living.) 

The challenge for someone in the business, thus, is to offer the right facilities at the right price and still make money out of the proposition. That’s where the Indian model appears to be different from how senior living operates in the rest of the world.

High pay-offs

Strictly speaking, there are three ways in which developers offer senior homes to buyers but going by the evidence, only one  is really popular. Long leases and monthly rentals are available across several properties but haven’t really taken off. In the former, the resident puts down a deposit (which may not be totally refundable) and pays a monthly fee in addition; he has no rights over the property and it reverts to the developer when the lease is up. At Aarogya Kudumbam, for instance, all units are available on a long lease, points out founder Raju. “We operate on a no-profit, no-loss basis, so the deposit is refunded when the arrangement ends,” he adds. That’s an exception: in most long leases, some portion of the deposit, if not all of it, in non-refundable.

"We operate on a no-profit, no-loss basis, so the deposit is refunded when the arrangement ends" - PC Raju, founder, Aarogya Kudumbam

Monthly rental arrangements are also not popular because of the lack of security regarding tenure for the senior citizen, although they do find takers with older people who want to either try out a community or need to stay only for a limited period. The bulk of deals in senior living communities, though, happen through outright sale of property. Serene’s Anand attributes that primarily to the Indian psyche, which finds comfort in owning property. “It brings a sense of security and comfort to the resident that he will not be asked to leave the property,” he points out. Moreover, in the other models where the resident pays a monthly fee for staying in the complex, there is no guarantee that the fee won’t increase in the future, which may hurt the senior’s finances.  “Besides, if the resident ever needs the money, he always has the option of selling the property at the current market price since these are usually freehold,” Anand adds.

And prices at some of these communities are certainly rising fast, if not faster than regular real estate projects. Ask Arvind Bhalerao. The 81-year-old retired PSU executive bought his 630 sq ft apartment at Paranjape’s Athashri project in Pashan, Pune, in 2004 for Rs 10 lakh. Now, he says, he’s getting offers for close to Rs 50 lakh. “That was unexpected,” says Bhalerao, adding hastily that he has no plans to sell.

There are advantages for the builder, too, with such a model, the biggest being quicker and higher returns. It also helps that units can be sold even as construction is ongoing, ensuring a steady revenue stream. In an ownership model, the resident pays anywhere upward of Rs 20 lakh for a unit in a senior living project — as with any real estate development, prices depend on the area, how posh it is and what’s on offer. Antara Senior Living, for instance, plans to charge a jaw-dropping Rs 7 crore for a penthouse in its Dehradun retirement community. Amenities at the project, which will be completed by end-FY16, will include yoga and meditation facilities and proximity to a group-owned Max Hospital, and most apartments will carry tags of Rs 1.5-4.5 crore. “Our target customers are people who are used to living in large homes. We want to provide them the same level of luxury once they retire. We will sell the apartments using the referral model, which will ensure we pick our buyers carefully. There is a market for people who want to live very well,” says Tara Singh, Analjit Singh’s daughter and CEO of Antara Senior Living. And remember, that’s just the price of buying the property — at Antara, residents will also have to pay Rs 29,000 a month to enjoy the facilities on offer and pay an additional Rs 16 per sq ft as maintenance (the apartments range between 1,400 and 5,000 sq ft).

Playing it safe - Graphic

Indeed, all residents of a senior community, regardless of their mode of residency, pay monthly charges for food, electricity, medical care, telephone, internet and other services, which is over and above what they pay for staying in the complex. According to JLL’s Bhavsar, residents in any senior living facility today have a monthly outgo of between Rs 3,000 and Rs 20,000. “Services offered would range from food, healthcare and wellness, security, audio-visual libraries and social engagement, among other things. Food is the largest expense and accounts for 25-30% of the spend, while housekeeping takes away another 20%.”

"We want to provide people used to living in large homes the same level of luxury when they retire" - Tara Singh, CEO, Antara Senior Living 

But the way forward is with the deferred fee model, believes MH Dalal, chairman, Oasis Senior Citizens Communes. Here, the buyer pays 25% less than market price and after a lock-in period, owns the property. “We’ll be responsible for maintenance and upkeep of the premises and if the buyer opts out or dies before the lock-in ends, he (or his heir) gets 10-25% of the appreciated value,” Dalal explains. Oasis, which already runs Golden Nest, a senior living project in Pune, will offer the deferred lease model at its new project in Talegaon, where it is investing Rs 30 crore in 100 units. “There’s no other way to get more people to invest in senior living when prices are so high,” he says.

"Deferred fees is the preferred model to get more people to invest when prices are so high" - MH Dalal, chairman, Oasis Senior Citizen Communes

But, increasingly, senior citizens in India seem willing to pay a little extra for the pleasure of being with like-minded people of similar age, live in comfortable, spacious homes in salubrious climes and leave behind the grind of big cities. Shama Vijayan, who returned after retirement in Dubai to become a Golden Nest resident, sums it up: “It’s better for seniors to live on their own. We can’t keep pace with modern lifestyles and it’s a relief to be away from metros.” That’s music to the ears of developers such as Paranjape, Anand and Gupta.