Healthcare realty emerging as next big thing on horizon-I

By: Sanjay Dwivedi

Track2Realty Exclusive

It is no more portfolio diversification that is driving the real estate developers into medical realty, it is rather a serious business as Track2Realty observes. After all, no other vertical of realty is as resilient to macro economic conditions as healthcare realty and it also needs more space than retail in the year ahead.

If retail attracted the fancy of the real estate due to the overall economic boom and consumption pattern, and office space for export potential of IT & BPOs, then the healthcare was adopted by the developers out of the need. However, what started as an essential component of most of the integrated townships soon transformed into a cash flow component of the realtors’ kitty. As a result, the healthcare emerged as a serious business for several real estate developers. The economic downturn also made them understand that healthcare is generally resilient to the overall macro economic condition.

Many realtors are either in talks with or have already partnered with hospital chains to cash in on the opportunity that lurks on the horizon. Foray into clinical realty is no more seen as another vertical in the kitty, but a proven venture to ensure financial success. With medi-cities and integrated townships coming up across the country and medical tourism being encouraged with policy incentives, hospital realty is emerging as the next ‘big thing’ of a developer’s profile.

If the projected growth is any indication, it is just the beginning of medical realty in India. The Indian healthcare sector, is poised to reach US$ 280 billion by the year 2020, thereby contributing an expected Gross Domestic Product (GDP) spend of 8 per cent by 2012 from 5.5 per cent in 2009, according to a report by an industry body. A US$ 36 billion industry today and growing at 15 per cent compound annual growth rate (CAGR), the Indian healthcare industry will reach the market value of US$ 280 billion by 2022.

However, what is poised to make the real estate developers bullish on the medical realty is the fact that the fresh developments in the segment will need around 250 million square feet of space, 25 per cent more than the 200 million square feet of space expected in organized retail.

Last couple of year have been years of dramatic changes. Most of the existing players announced their huge expansion plans and many of large companies with no or very little existence in healthcare delivery declared that they will be putting in huge investments in healthcare delivery. The growth and sudden interest in the healthcare business can be attributed to many factor, one of the most strong of which is the strong Indian economy.

……to be continued