India had approximately 100 million senior citizens aged 60 and above in 2012. This number is expected to double by 2030; by 2050, it is likely to reach approximately 320 million – constituting 20% of the country’s total population. There are reasons behind this monumental projected growth.
India’s population has undergone a change in character, which we can also call a ‘demographic transition’. From higher mortality and fertility rates in the beginning of the decade, the country has now entered a stage where there is a fall in birth rate. However, the fall is not as steep as the fall in death rates, as average life expectancy and quality of life has improved dramatically in India in the recent time.
More Senior CitizensThan Ever Before
Though India is still younger than the US and Japan, the process of ageing has begun in the country. India’s elders will increase both in absolute numbers and relative strength, indicating a gradual swing to a greyer population.The marked increase in percentage of India’s senior population expected in the foreseeable future will involve a change in an important sociological aspect -the ‘old age dependency’ratio. Currently, the ratio is approximately 8-9%; however, according to an estimate of United Nations, this ratio will be closer to 20% in India by 2050.
Rapid advances in medical breakthroughs, proliferation and improvement in the overall quality of medical facilities and care and increasing access to medical insurance have much to do with it. Another factor driving India’s increasing elder population is growing awareness related to diet, exercise and personal care. That is the good part, but there is a more worrisome aspect too.
As per the findings by National Family Health Survey in 2005-06 (NFHS-3), every three Indian household out of five – or about 63% – are nuclear families. This changing social environmentmeans that India’s younger generation is facing serious challenges when it comes to taking care of their elders.
Housing India’s Seniors
In the past, generic old-age homes – and all the real and perceived drawbacks they presented – were more or less the only answer. However, the country is now witnessing the gradual evolution of a concept that is already well-entrenched in the developed countries – senior living homes, sometimes called retirement resorts.
Currently there are approximately 30–35 senior living projects in the country. Unfortunately, this represents a major shortfall – they accommodate only 0.0001% of the target segment (India’s senior citizens) as compared to 10% in the US and approximately 4% in Australia. India currently contributes less than 1% of the Global Senior Living industry, highlighting the huge demand and supply gap and growth potential of the sector.
This begs the question – if the demand for senior living projects is so high in India, why is the sector’s growth so slow? Actually, thesenior living concept took hold in the country in the early 2000, but the sector started gaining any kind of serious momentum only after 2010. Also, growth in this sector has been happening in pockets rather than holistically.
Stilted Geographic Distribution
Most of the country’s senior living projects have cropped up in the Western and Southern regions. This is because these regions have a greater prevalence of nuclear families, higher level of education among their population, and a more pronounced yen for young professionals to migrate to other countries. Two other factors very visible in West and South India are higher purchasing power, resulting in a lower dependency ratio of seniors on family members.
It is only after witnessing the high acceptance rate of senior living projects in West and South India that developers began training their sights on the northern and eastern regions of India, predominantly targeting tier 2 and tier 3 cities.
Senior Living – The Finances Involved
Unlike other parts of the World, Senior Living a new concept in India and hence is not part of social infrastructure sector, which means it is purely private developer led sector at present. Many developers and operators find venturing into this sector profitable and are developing various senior living projects, albeit with different financial models as per the local demands, financial viability of projects and sale plans.
Broadly, three financial models have been observed in India, to acquire/reside a senior living project. These are the outright purchase model, the pure rent model and upfront deposit with periodic rent model. All three models have their advantages and drawbacks.
Outright salemodel involves the transfer of title of the property in name of the end user. It works like a typical residential real estate purchase, where the developer sells the residential stock in the market while the construction is still in progress.
Advantages: The developer is obviously able to make higher and quicker returns using this model, and it appeals most to customers as well. This is because actually owning the property means that it can thereafter be used for mortgage or collateral purpose, which makes it easier for buyers to raise bank loans or other forms of financing from the property.
Disadvantages: When a developer sells a senior living property, it becomes difficult for him to differentiate between an end user and a speculative buyer. Also, it can lead to a lack of control of the developer or senior housing operator, which may have a bearing on the quality and ease of day-to-day operations of the project.Seamless operations are a critically important aspect of a good senior living project and hence most of the Senior Living developers and operators are willing to have more control on usage of these projects, which is difficult to achieve in pure Sale model.
Some of the senior living projects operating on an outright sale model in India are:
- Ashiana Utsav
- Serene Covai Properties
- Golden Nest Pune
Under the pure rentmodel, residents pay a monthly rent along with nominal deposit over their period of stay. This model is suitable for developer and operators from the point of gaining control on usage of properties, but with no upfront deposit or sale revenues, it is difficult to manage profitability in this model.
Advantages:This model ensures that the customers (senior citizens) subscribing to the project are most likely to actually occupy their unit. It also allows the developer or operator to determine the scale of day-to-day operations required in the project. Customers benefit from this model since their entry cost into the project is much lower, thereby reducing their financial burden.Further, it is ensured that the essence of the project is maintained since the end users occupying the project would be of a pre-determined similar age group, having similar preferences and requirements.
Disadvantages: The pure rentmodel exposes the developer / operator to higher level of financial risk because of low and deferred returns. Further, there is an increased tendency among the end users to switch projects. For the customer, the drawbacks of this model would include lack of participation in capital appreciation associated with the project.
Some of the senior living projects operating on a pure rent model in India are:
- RakIndo Senior Living Coimbatore
- Dignity Lifestyle Neral
- Upfront Deposit and Lease Model
Upfront deposit and lease model is fusion of above two models. Under this model, a percentage of capital value of the project is charged upfront, while the rest of the amount is paid in the form of monthly rentals over the period of stay.
Advantages:This model allows flexibility of payments for entry cost into the project. The customer can pay an upfront fee followed by regular lease rentals. This model is preferred by end users because it reduces their entry cost into the project. The developer can retain the ownership and control in the project.
Disadvantages: For the developer, the payback period and returns are generally lower vis-à-vis an outright sale model. For customers, the drawback of this model could include payment of substantial amount of upfront deposit (though lower amount than in case of outright sale model), yet very little or no participation in the capital appreciation associated with the project. Further, switching of project in case of mediocre or unsatisfactory services and facilities could become a challenge for the end user in case of lack of defined rules for refund of deposit / upfront payment.
Some of the senior living projects operating on a lease/deposit model in India are:
- Brindavan Hill View, Coimbatore – Deposit Model
- Dignity Lifestyle, Neral – Lease and Deposit Model
- Impact Senior Living, Amritsar –Deposit and Sale Model
The way forward
With families getting smaller and nuclear, children travelling across the globe, and a paucity of social security programs, upwardly mobile Indians see senior living as an attractive option for their elders. Senior living industry in India is poised for significant growth and the industry is expected to see the entry of new players from various backgrounds, predominantly from the real estate and healthcare sector. However, since the sector is still at its nascent stage in India, it is expected to undergo various changes to mature into a new cornerstone for Indian real estate and healthcare industry.