Mumbai, November 23, 2023:  In their latest report, global real estate consultancy Knight Frank and their U.S. partners Berkadia, note that India is currently facing a deficit of 2 billion square feet of healthcare space to cater to its current population base of 1.42 billion people. The estimated need for additional beds to reach the recommended ratio of 3 beds per 1000 people is stands at 2.4 million beds. India has a considerable gap between the number of hospital beds available in the country and the number of hospital beds required. India’s existing bed to population ratio is 1.3/1000 population (both private and public hospitals included), and there is a deficit of 1.7/1000 population. To cater to the existing population, there is an additional requirement of 2.4 mn beds. This disparity provides an opportunity for public and private players, to expand their footprint in the healthcare industry in India.  As per Indian government estimates, there are about 582 investment opportunities in medical infrastructure including hospitals valued at US$ 32bn. The hospital industry accounts for 80% of the healthcare market in India. Currently, India has an estimated 70,000 hospitals of which the private sector constitutes 63% of the total share.

Source: WHO, Niti Aayog, Knight Frank Research

India’s healthcare market was estimated to be at US$ 372 bn in 2022, a significant growth from US$ 73 bn a decade ago, in 2012. At this level and pace, India’s health care industry has grown at an annual average rate of 18% and got accelerated with pandemic as it challenged the healthcare sector by stretching the need for infrastructure and service delivery, therefore making it a trigger for transformation. Global investments in healthcare related real estate has reached US$38 bn, accounting to 4.3% of total global real estate investments

Expansion of India’s healthcare market

Source: IBEF, Knight Frank Research

As part of the Sustainable Development Goals, India is committed to achieving Universal Healthcare Coverage. To achieve its goals, the policy makers in India have introduced schemes over the years pertaining to insurance as well as access to affordable healthcare services. India’s National Healthcare Policy (2017) aims to achieve government spending on healthcare upto 2.5% of the GDP. The Central Government’s budgetary allocation to healthcare so far has increased from 1.2% of the GDP in FY 2014 to 2.1% of the GDP in FY 2023.

Demand drivers of India’s healthcare industry

As per Knight Frank’s analysis, India is one of the fastest growing economies with high personal spending potential of individuals of which healthcare comprises as major share. Factors such as the gradual rise in an ageing population, increasing per capita incomes, growing health awareness and the penetration of health insurance drive the demand for the healthcare industry in India. Additionally, there has been a growing incidence of lifestyle diseases in India led by cardiovascular diseases, which will heighten the demand for specialized healthcare.

India: Popular destination for healthcare tourism

India is emerging as one of the most affordable healthcare destinations in the world providing quality medical procedures at a relatively cheap cost. In the pre-pandemic years between 2014-2019, the inflow of foreign tourist arrivals on medical visa grew at a CAGR of 30%. It is noteworthy that despite the deficit in healthcare infrastructure in India, the country is an attractive market for healthcare tourism. As per Medical Tourism Index (2020-21), India ranked 10^th out of 46 destinations in the world. With an aim to improve medical tourism, India’s tourism ministry formulated a national strategy and roadmap for medical and wellness tourism in 2022 under the ‘Heal in India’ initiative with the primary objective to strengthen the healthcare ecosystem in the country.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said “The challenge of India’s population to bed ratio, coupled with increasing population, underscores the pressing need for significant enhancement in the country’s healthcare infrastructure. Addressing this demand necessitates nearly doubling the current real estate capacity to adequately meet the expanding healthcare requirements of the population. Post the pandemic, healthcare ranks amongst the mainstream avenues for investors looking for investments into long income generating assets. According to our Attitudes Survey, almost one-fourth of the Indian ultra-high net worth individuals had cited to invest in healthcare related assets in 2023. There is also an emerging opportunity for investments in medical research and development, to accentuate discovery of new drugs to navigate any future break out of pandemic inflicted diseases.”

Cross country cost comparison of medical procedures

Source: GoI, Knight Frank Research

The global healthcare sector remains buoyant and is expected to grow despite a challenging economic outlook. This comes as the global population shifts rapidly towards an ageing demographic, which is anticipated to drive demand for elderly care beds, particularly for full-time nursing care delivered in specialised facilities. Investors have seized upon is trend, with North American capital contributing almost 68% of the funds deployed in the past year, while France and Belgium attracted the highest levels of cross-border investments. Recognizing the potential of APAC’s ageing demographic, the private sector is actively exploring opportunities in response. Acquisitions of operating assets in the APAC care sectors reached a record high of US$2.8 billion in 2022.

Julian Evans, Partner and Head of Healthcare at Knight Frank said: “Broad in its coverage, the case for investment in the healthcare sector remains consistent not only across its various subsectors but also across geographic borders. Supported by an ageing population across the globe and shifting demographic trends, the healthcare sector is seeing increased demand for long-term care facilities. Furthermore, as private equity, REITS and institutional investors continue to chase the strong, long income generated, there is growing interest in healthcare’s capabilities to aid ESG investing strategies.”

The post India requires an additional 2 billion sq. ft. of healthcare real estate to fulfill the existing population need: Knight Frank appeared first on newsmantra.in l Latest news on Politics, World, Bollywood, Sports, Delhi, Jammu & Kashmir, Trending news | News Mantra.

Although the decline in the investment climate in India was due to a conservative shift in investment strategies due to increasing investor caution in the face of rising geopolitical tensions and interest rates, total PE investment in the real estate sector reached $5.6 billion in 2023, a growth of 5.3 per cent over the previous year.

Across the sector, the office sector accounted for the largest share of all PE investments at 68 per cent, followed by warehousing at 21 per cent and residential at 11 per cent. This is a 20 per cent decline from H1 2022, as PE investors took a cautious approach in H1 2023, resulting in a conservative shift in investment strategies.

Despite prevailing global concerns impacting investment, growth has slowed only to a limited extent and is expected to rebound in the second half of 2023. Overall, PE investment in India’s real estate sector is estimated to reach $5.6 billion in 2023, representing a year-on-year growth of 5.3%. The decline in investments is the result of a conservative shift in investment strategies.

The report data showed that PE ‘s investments in the Indian office sector reached a staggering USD 1.8 billion in the first half of 2023. Although investments from PE continued to lead in the first half of 2023, accounting for a 68% share of total investments, this dominance was supported by the resilience of investable office real estate. PE investment in the office sector registered a 24 per cent year-on-year increase during the period, driven primarily by a large deal worth $1.4 billion between GIC and Brookfield India Real Estate Trust REIT. About 80 per cent of the investment was in completed properties, while 20 per cent was in new and under-construction projects. Mumbai, NCR and Bengaluru emerged as leading office investment destinations in the first half of 2023.

According to the report, the residential sector attracted PE investments $277 million in investments during the same period. The investments were largely residential projects that were still under construction and targeted early-stage investments for better returns. A total of 82 per cent of PE was invested in the housing sector by foreign PE. NCR and Bengaluru emerged as the leading investment destinations, driven by development stage transactions involving prominent global players. Though India’s retail sector did not see PE investment during this H1 2023 period, listing of a retail company REIT would lead to increased investor interest, with tier metros II having more appeal.

Though India’s retail sector did not see PE investment during this H1 2023 period, listing of a retail company REIT would lead to increased investor interest, with tier II metros having more appeal. Investor interest in the retail sector has expanded beyond major metropolitan cities in the last decade. Markets like Chandigarh attracted investments of $267 million, Nagpur and Amritsar $100 million each, Indore $61 million and Bhubaneshwar $46 million.

However, the warehouses segment witnessed a decline in the first half of 2023 with an amount of $555 million compared to $1.2 billion in the first half of 2022. According to the report, lack of supply of quality facilities contributed to the slowdown in investments in the sector. Across India, Mumbai saw the highest investment at 48%, with NCR second at 32% and Bengaluru at 13%. Nearly 75% of investments came from Asian countries in H1 2023, compared to 86% of investments from Canada and the US in H1 2022.

Shishir Baijal, Chairman & Managing Director, Knight Frank, said, “India’s economic growth in the last few quarters has been a strong reason for long-term confidence among global investors. However, we have seen a decline in investment volumes over the past year due to global economic challenges that have led some major economies to take drastic fiscal and monetary measures. This has prompted investors to re-evaluate their strategies, at least in the short term. The Indian office sector continues to attract investors, especially when it comes to high-yielding assets. Unlike other global gateway markets, India has seen steady growth momentum, which has boosted investor confidence in the sector. Looking ahead, the office sector is likely to remain a favorited among investors, as it is expected to maintain its momentum in the short to medium term.”

The office segment has been PE investors’ preferred choice for investment in the first half of 2023, mainly due to the resilience of high-quality office properties. The report forecasts factors such as government investment, currency fluctuations, inflation, interest rates and office supply to drive 5.3% annual growth in PE investment in India in 2023 to $5.6 billion. The outlook for PE investment in Indian office real estate remains positive. As global headwinds ease, the resilience of the Indian economy and the favorable economics of real estate investments will have a positive impact on PE investment activity in the sector, the report said.

-SURESH RATHOD

The post PE investment in Indian real estate drops 20% in H1 2023: report appeared first on newsmantra.in l Latest news on Politics, World, Bollywood, Sports, Delhi, Jammu & Kashmir, Trending news | News Mantra.