With the high cost of senior living apartments and little support from banks, new launches of such stand-alone projects have come down since the pandemic. Only a handful have been launched in metro cities such as Bengaluru and Mumbai, and that too by local real estate players.
Of late, several top developers have started launching senior living projects within their integrated townships, thus attracting more homebuyers. But even these apartments start at Rs 1 crore, putting it beyond the reach of many.
Thus, developers are exploring the monthly rental model for senior living, which not only makes such apartments more affordable, but also opens up the senior living sector to different sections of society, said Swapnil Anil, Executive Director & Head, Advisory Services, at Colliers, a real estate investment and management firm.
How does the rental model work?
The rental model for senior living is similar to apartment rentals, where seniors, instead of investing in an asset, rent the apartment for a certain period. Besides the monthly rental, one needs to pay a refundable security deposit.
Most of the rental models available today fall under assisted living, where the seniors are assisted with daily chores like cooking, cleaning, and also provided basic medical care.
For example, US-based Columbia Pacific Communities (CPC) will be foraying into the senior rental market in east Bengaluru by the end of this calendar year.
Mohit Nirula, CEO of Columbia Pacific Communities, told Moneycontrol, "The rental model for the assisted living community will start from Rs 70,000-1 lakh, which includes certain services, along with a six-month security deposit."
Are rental models more affordable?
Experts say though the rental model for senior living is still at a nascent stage, it holds the potential to revive the sector, albeit slowly.
A senior living apartment with a monthly rental of Rs 50,000 will cost at least Rs 1 crore if one were to buy it. "In India, where we do not have long-term home loans for seniors, the rental model will reduce the financial burden on the elderly," Anil said.
However, financial advisor Suresh Sadagopan believes that even the rental model will be beneficial only for seniors with ample savings. "With a rental of Rs 50,000 or even Rs 30,000, seniors will be paying more in such projects as developers will charge a premium for the special services they render," he added.
For example, a senior living apartment with a rental of Rs 50,000 will include basic services like cleaning. However, Sadgopan said, special services like helping the elderly bathe, or provide food, etc., will be at a premium. "In comparison, in a rented apartment that costs Rs 30,000 per month, even with a personal nurse for Rs 15,000- 20,000, one will be shelling out less money overall," he added.
The model will be beneficial mostly for seniors in the higher end of the middle-income group, where they can afford the rental from their savings, or with the help of their children.
Experts say the rentals can be reduced by at least 10-15 percent. For example, Manasum, another senior living operator in Bengaluru, is renting out 2-3 BHK apartments for Rs 30,000- 50,000.
Sadgopal said that personal choice will play a major role in deciding whether to buy or rent. "A lot of senior citizens will prefer to have their own apartment. The rental model will work out only if we can make it significantly cheaper," he added.
The rental model has its own challenges
Manasum added that as senior living projects come closer to Bengaluru’s central business district , rentals will go up significantly.
Just like the occupier, developers too have their own challenges with the rental model, Anil said. "The residential rental yield for the outskirts is about 2-2.5 percent, while for CBD areas it is 4-4.5 percent. At such yields, particularly in the suburbs, the developers' holding costs become high, especially when he has to hold the asset for a longer period and provide special services," he added.
Experts say that coupled with the high capex required for such projects, the low return rate will dampen supply across geographies.
"Also, if after 11 months the senior decides to leave, getting a new senior occupant will take longer compared to getting a regular tenant. This raises the developers costs," Anil added.
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