Serviced apartments becoming popular in the NCR

While serviced apartments promise to provide hassle-free accommodation, the high price of the units and delayed construction can be a big risk for buyers. Here’s a cost-benefit analysis

In a recently-launched project in the National Capital Region (NCR), the developer promised amenities, such as power back-up, fully air-conditioned rooms, modular kitchens, pantry and laundry facilities, as well as a professional concierge services within the premise. Over the last few years, there has been a notable increase in the demand and supply of such ‘serviced apartments’ in the region. Moreover, a strong secondary market has also emerged, for serviced and furnished apartments.

This segment has emerged, owing to the demand for furnished rooms from business travellers and the young workforce coming into the metro. Consequently, development firms are focusing on increasing their sales in this segment. A channel partner of Gaur Suites from Finlace Consulting, who wished to remain anonymous, explains “The concept of serviced apartments is becoming popular in the metropolitan and big cities, such as the NCR. Most of the projects that have been launched so far, have registered healthy offtake.” Upcoming and under-construction projects are expected to ready for possession after 2016.

 

Merits and demerits of serviced apartments

For owners, these apartments serve as profitable assets that can be leased out. The rental yield is decent, as compared to the rent for an average hotel room. Moreover, the owner can rent it out to different types of tenants, including business travellers, travellers on vacation, or to young individuals working in the neighbouring regions.

In India, the general rental yield from a residential property, ranges between 3% and 5%. In comparison to this, the capital appreciation on properties in the NCR is over 10%-12%, annually. The current rent in an upmarket locality of the NCR, ranges from Rs 8,000 to as high as Rs one lakh per month, with the higher prices being commanded by the bigger apartments.

See also: Do park-facing apartments deserve a higher price?

However, the initial investment rates are higher for serviced apartments. For example, the sale price of a serviced apartment along the Noida-Greater Noida Expressway, is around Rs 6,000 to Rs 7,000 per sq ft. On the other hand, a regular, bare-shell apartment on the same stretch will cost Rs 4,000 to Rs 5,000 per sq ft. Another grey area in this segment, pertains to maintenance and services. While a few developers have tied up with professional firms or hotels, for services, others are simply providing the amenities in their projects and leaving it to the buyers to take care of all the maintenance.

 

Strong secondary market

Compared to the primary market, the secondary market in the NCR is robust. Old areas of Delhi, where one can see redevelopment projects, now have such serviced apartments. Areas of south Delhi, west Delhi, Dwarka and the new sectors in Noida and Gurgaon too, offer such apartments. The costs of these apartments vary, depending on the location. A 1-BHK, 600-700 sq ft apartment in the upmarket south Delhi, can cost as high as Rs 60 lakh to Rs one crore.

 

Who should invest in serviced apartments?

Buyers with extra cash can invest in this rentable asset in established areas. Nevertheless, risks exist. “Like any other residential segment, delays in construction are also being witnessed in the serviced apartments segment,” cautions Surabhi Arora, associate director – research, Colliers International. The other class of buyers are those, who may have to set up their base in the metro, for business reasons. First-time home buyers, should avoid investing in serviced apartments and instead, focus on regular apartments in the same area, advises Arora.

ProjectRegionSize/area on offer (in sq ft)ConfigurationBasic selling price (in Rs per sq ft)Tentative completion date
Unnati Fortune Vesta SuitesSector 144, Noida-Greater Noida Expressway5001-BHK6,000End of 2019
Nimi Symbolic HomesSector 80, Noida800-9002-BHK3,150Mid-2017
Gaur SuitesNoida ExtensionApproximately 5001-BHK6,000End of 2018
Wave City Centre LivorkSector 32, Noida6721-BHK8,900Mid-2016
Wave AmoreSector 32, Noida1,5482-BHK7,400End of 2016
Assotech Business CresterraSector 135, Noida Expressway6001-BHK7,100Mid-2017
Nimbus Golden PalmsSector 168, Noida5061-BHK6,500End of 2016
Imperia 37th AvenueSector 37C, Gurgaon9002-BHK5,500End of 2018
Imperia ElvedorSector 37C, Gurgaon6251-BHK5,400End of 2017
Magnum City CentreSector 63-A, Golf Course Extension Road,  Gurgaon7571-BHK9,750End of 2018
Elan MercadoSector  80, Gurgaon6751-BHK8,500Mid-2019
Gambhir Housing Precision Soho TowerSector 67, Gurgaon5251-BHK5,500End of 2016
Central Park 3, The RoomSohna, Gurgaon11882-BHK6,300Feb 2016
M3M Urbana One-Key Resi-mentsSector 67, Gurgaon5501-BHK9,700July 2016
Burman The SpectrumSector 82A, Gurgaon6631-BHK9,900End 2018

Table source: Market research, Content Consultants

 

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