Demand for super luxury residential apartments has no doubt gone up after three waves of COVID-19 but what has caught the fancy of high net-worth individuals (HNWIs) of late are branded residences launched by grade-A real estate developers in association with top hotel brands. These apartments come with concierge services, 24-hour security, and landscaping and even dry cleaning services offered by five-star hotels, for a fee of course!
The branded residences segment is back after a hiatus of almost 15 years because of the Indian real estate market becoming regulated and the growth in wealth accumulated by these HNWIs over the last few years, especially after the pandemic.
Oberoi Hotels recently launched 19 Trident Residences in the national capital, which will be available for purchase this summer. Located in the heart of New Delhi, close to the group's Dr Zakir Hussain Marg property, sizes of Trident Residences range from 3,600 sq ft to 9,300 sq ft.
According to Knight Frank’s latest study, The Wealth Report: Outlook 2023, 88 percent or nearly 9 out of 10 Indian ultra-high-net-worth individuals (UHNWIs) witnessed an increase in wealth in 2022. Around 35 percent of Indian UHNWIs saw total wealth change by more than 10 percent. As much as 84 percent of the investable wealth of Indian UHNWIs is allocated between equities, real estate and bonds.
What are these branded residences?
Branded residences, as the name suggests, are luxury homes for which hospitality chains lend their brand to a super-luxury housing project and provide management services for a fee.
This is not a new concept, with projects dating back to the 1920s in New York, when the Sherry-Netherland hotel opened with luxury apartments facing Central Park. In Asia, the first branded residence project dates back to 1988 with the development of Amanpuri in Phuket, Thailand.
Globally, market leaders in this segment include Marriott International (Ritz Carlton and St Regis), Four Seasons, Accor (Fairmont and Banyan Tree), Mandarin Oriental and Rosewood. Automobile firms such as Porsche Design and Aston Martin and fashion companies such as Armani and Missoni have also entered this space to expand their offerings.
A branded residence generally has two models. One, where a well-known brand such as Trump Towers lends its name to a residential tower for a fee and the second model under which a global hotel chain ties up with an A-grade developer and comes up with what are referred to as branded serviced and managed apartments.
Several hotel chains have tied up with top developers in Delhi, Mumbai, Bengaluru, Goa and even Himachal Pradesh to launch these branded residences.
Buyers of branded residences receive exclusive benefits such as loyalty programme status for a number of years and discount privileges for the hotel brand’s restaurants and spa services, and invitations to exclusive brand events.
The hotel brand offers services for an annual charge within the residential complex such as concierge services, business centre services, common area upkeep, 24-hour security, landscaping, spa, fitness centre, and tennis and other sports amenities, among others.
A Guide to Branded Residences for Developers and Investors by JLL, a global real estate consultancy, has said that given the demand for this offering as well as brand companies continuing to seek ways to expand their business, there is growth in the ‘standalone’ branded residential projects, attracting developers/investors looking to achieve premium pricing and accelerate the pace of sales.
It explains that branded residences are concentrated in the luxury and ultra-luxury segment as the target consumer is typically an HNWI. These units can be used as primary or secondary homes, with the use being influenced by the location of the property. Branded residences for primary use often are situated in urban/dense markets, whereas residences used as secondary homes tend to be in more resort-oriented destinations.
Brand association and enhanced services in branded residences allow developers/investors to benefit from price premiums compared to unbranded, high-quality residential projects. When developed in conjunction with a hotel property, branded residences allow developers/ investors to rely on purchase deposits by future residents to fund the completion of the project’s development, depending on local rules and regulations. This is particularly attractive in markets where access to debt is limited and interest rates are high, explains the Guide.
In markets where the supply of quality condominium developments is considered saturated, residential developers/investors can also look for a brand association to differentiate their product from the competition and increase sales velocity.
Purchasers are the ultimate beneficiaries of branded residences. Branding is a form of quality assurance for purchasers and buying into a branded residential property can represent an emotional acquisition of a ‘trophy’ asset. There is also less perceived risk knowing the brand vetted the developer/investor before granting branding rights, the document states.
“There is demand in India for anything that is branded. People just want to seek comfort in the fact that their residence is being managed by a professionally-run operations team. And that’s what a typical hotel operator brings to the table,” explains Manav Thadani, founder-chairman, Hotelivate, a hospitality consultancy, and board member at SAMHI Hotels, which has management contracts with Marriott, IHG and Hyatt hotels in India.
How are branded residences launched in 2007 different from new launches?
Today several hotel chains are looking at branded residences again after having burnt their fingers in 2007 because many developers did not deliver the projects they had promised.
“A few hotel brands have started to assess branded residential business again in India after almost a decade's pause. Back in 2007, this trend began to pick up as hotel companies started lending their premium brands to real estate developers on their luxury residential projects. Both developers and homebuyers were a bit premature at that time. Due to lack of regulatory framework, the projects were sold on promises and brochures but the projects never got completed on time,” said Jaideep Dang, managing director, hotels and hospitality group, India, JLL.
The story is very different today. With the Real Estate (Regulation and Development) Act or RERA in place, there is cost and sale revenue discipline. Quality real estate developers have the cash flow and experience to deliver premium residential projects. That has given hotel brands courage to re-enter this space, he said.
Moreover, the after-effects of the pandemic has given an impetus to premium luxury housing. Across metropolitan cities, homebuyers are looking at bigger apartments loaded with luxury hotel-style and quality fixtures and finishes. There is a genuine demand for a differentiated residential product, which the leading hotel chains are capable of providing.
Most premium apartments undertaken by top-class real estate companies are offered as ‘bare shells’ to buyers and it is left to them to complete it in the manner they think fit. HNWIs are typically more likely to appoint their own designer to customise the unit to their liking. A branded residence, on the other hand, comes with ‘finished’ washrooms, wardrobes, ceilings, lighting—all taken care of by the hotel brand. These are furnished in accordance with the brand’s standards and design.
Today, most hotel brands are carefully partnering with real estate brands that have completed projects on time. Another difference is that instead of launching 200 branded residences, only about 20 to 40 are being launched to ensure that the boutique aspect is maintained.
“Today you may develop a Grade A project in an emerging location that may not be the best and yet you may succeed because people are willing to pay the premium if they get the right branded product,” Dang told Moneycontrol.
But the business fundamentals of luxury have to be maintained. “You cannot have a large inventory and call it exclusive. Luxury has to be limited. The ideal size of such branded residences in tier 1 cities should be 50-100 apartments. And in holiday destinations such as Goa and in the Himalayas, it should be 20-30 villas at a given location. Sales velocity of such projects is low. Hence, a real estate developer and a hotel brand should remain mindful of cash flows and delivery modules,” Dang added.
Following a global trend, “We have witnessed enhanced demand and receptivity for branded residences particularly from NRIs (non-resident Indians) and senior professionals who feel more comfortable having a marquee brand both design the space and also manage the real estate. Several global brands have already entered the Indian market and more are exploring the possibility. The important consideration for developers is to keep the overall costs under control. Our experience has been that higher costs deter buyers and they end up opting for other luxury residential options,” said Amit Goyal, India Sotheby’s International Realty's managing director for India, Sri Lanka and Maldives.
Branded residences projects
Trident Residences has been conceptualised by BI Luxury Residences, which recently helped refurbish and relaunch the 16th-century Billesley Manor Hotel in England.
Exclusive facilities offered at the recently launched Trident Residences in Delhi will include a concierge, lobby manager, meeting rooms, a fitness centre, 24-hour security, centralised maintenance, and more. Apartment owners can also access the business centre, salon services and dry cleaning at The Oberoi, New Delhi, delivery from The Oberoi Patisserie & Delicatessen and priority reservations at The Oberoi, New Delhi's restaurants and bars.
Apartment buyers will be able to enjoy Trident Privilege Membership, special offers at Trident Hotels' food and beverage outlets and in-residence dining. Family members can also avail of reservation privileges at Trident Hotels.
According to Shashank Bhagat, chairman, BI Group, “The civil work at the project site is complete and we are a year away from delivering the project. Interior work has started. The price for these 3,600-9,300 sq ft units start at Rs 20 crore to Rs 45 crore,” he said.
“This project has given us an opportunity to curate a community. These apartments are only sold by invitation,” Bhagat explained.
The company is planning to come up with a branded residences project in Bengaluru and Goa where it has already bought land. It is also scouting for other properties in Delhi but “our model will be to come up with only 20-30 apartments”, he said.
Bhartiya City in Bengaluru houses The Leela Residences. These are part of an integrated township spread across 125 acres of the Special Economic Zone in Hebbal.
“The pandemic brought about a shift in the consumer’s thought process. It also showed that the capital markets can be volatile. It is due to this reason that the investor started investing in real estate, pushing up capital values of residential units. At Bhartiya City we have close to 176 branded residences for which we have tied up with the Leela Group,” said Ashwinder Singh, CEO, residential, Bhartiya City, Bengaluru.
Branded residences cater to a niche segment that invests in them on account of the stature it brings, and the security and services the segment offers. Of late there has been an influx of expats in Bengaluru and a project like this one offers a holistic lifestyle that is comparable to anything globally, Singh said.
Yet another project is the Four Seasons Private Residences in Mumbai offering 41 sea-facing apartments located close to the Mahalaxmi Race Course and the Bandra-Worli Sea Link.
“These have been developed by Provenance Land, which has been into luxury hotels for over 40 years, having introduced the first international hotel chain in India in the early 1980s, the Hyatt brand. It was a natural progression to the hotel branded residence with Four Seasons with the now almost completed Four Seasons Private Residences Mumbai in Worli, which families will occupy from next quarter,” said Poonam Mahtani, vice president, marketing and sales, Provenance Land.
“Currently the company is working on multiple projects that will be announced in the near future. As an organisation we are very buoyant on the Mumbai Metropolitan Region and continue to focus on key micro markets,” she said.
“Owners of Four Seasons Private Residences Mumbai are a mix of industrialists, professionals from the financial services world and NRIs who spend a few months a year in India,” she added.
The fact that Indian HNWIs are global citizens and own homes all over the world is a big driver of growth in this sector. They expect the same experience now in India in terms of quality of design, architecture, technology and service that they experience globally. The Four Seasons Branded Residences globally command between 15 percent and 100 percent premium compared to luxury developments in their micro markets, said Mahtani.
Higher returns and appreciation
Branded residential projects tend to generate higher returns than standalone hotel projects as branded residences help improve the returns of cost-prohibitive five-star hotel developments and create premium returns for the overall project, the JLL Guide on Branded Residences said.
“An investment in a branded residence is a better bet than a conventional A Grade apartment as it is rare. These are marquee developments and it is highly unlikely that a hotel chain may decide to replicate a similar project in the same city,” said an expert.
It should also be remembered that the maintenance charge for branded residences will always be higher than that for a conventional luxury apartment as these are either managed by the hotel chains themselves or by international consultants. Having said that, it is based on actual costs divided by the number of apartments, the expert said.
Management and operations contracts with hotel brands span two to three decades. However, “A hotel brand may decide to exit if the developer has not lived up to the hotel brand’s expectations,” said Dang of JLL, adding there are proper exit provisions in place in management contracts and globally, the parties have regular third-party reviews as well.
Comments by Marriott Branded Residences are awaited. The copy will be updated once those are received.
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