The Economic Times Presents Social Infrastructure in India Panel Discussion

The Economic Times presents

Reifbs 2011
Real Estate Investment Forum & Business Spaces

Panel Discussion
Social Infrastructure in India-Arrival at last

Contents
• Evaluating the expanse of the Social Infrastructure Sector - Size, Potential,
Need Gap
• Factors responsible for the surfacing of this sector on real estate radar
• Significance and Growth Indicators for the times to come
• The need for its differentiated Real Estate strategies as against the regulars
• Best practices and successful case studies from across the states
• Annexure

HCC Real Estate September 2011
February 2011 Page 2

Evaluating the expanse of the Social Infrastructure Sector - Size,
Potential, Need Gap
• Social infrastructure in India : Education, Heath Care and Senior Living
• Reasons for exponential Growth of these sectors
1. Increase in Population: about 1.1 billion in 2009-2010 to 1.4 billion by 2026
2. Shift in demographics: 60 percent of the population in the younger age bracket
and an expected increase of geriatric population from current 96 million to around
168 million by 2026
3. Rise in disposable income: Households in the above INR 200,000 per annum
bracket can benefit from an increase in disposable income from 14 percent in
2009-2010E to 26 percent in 2014-2015P
4. Rising Literacy: Growing general awareness and demand for quality about
healthcare and education as a result of increase in literacy rates


Evaluating the expanse of the Social Infrastructure Sector - Size,
Potential, Need Gap contd…
• Social infrastructure in India : Critical Success Factors for Business

1. Identifying the need (Target Audience)
2. Providing Delivery mechanism (Made-to-order solutions)
3. Accessing affordable financing (Innovative means of Financing)
4. Understanding the business operations & Structure (Innovative Structuring)
5. Working out a Scalable Business Model (Expansion)
6. Putting together systems, processes and Management (Operations)


Factors responsible for the surfacing of this sector on real
estate radar
Providing Quality healthcare, education and senior living is becoming the responsibility of the real
estate developer on account of
• Changing Scale and complexity of Real Estate Business- From Single building to Residential
complexes to integrated Townships to Special Economic zones to privately developed Cities
• Establishments of New Concepts - Walk to work – walk to learn – walk to play – walk to
healthcare
• Preference to Private Service Provider over Government Service Provider in healthcare and
Education
• Increasing Specialization in healthcare and Education- from Nursery to Doctoral programme
are run by different institutions specialist and healthcare is provided by speciality and super-
speciality institutions often on franchisee model
• Emergence of new businesses such as Wellness and preventive medical care in healthcare and
vocational courses in education
• Unique Structuring of Education Project requires an association between a not-for Profit player
like a trust to own the institution and a separate company to own and manage the infrastructure


estate radar contd…

Source: CRISIL Research


Senior Living: Senior living is the latest entrant on residential real estate front, Cities
like Pune, Bangalore and Chandigarh were called as “Pensioner‟s Paradise” and
constructing your own bungalow was the only alternative but now senior living/ assisted
living/ group living alternatives are provided by real estate developers or trusts/
foundations/ NGOs. Locations with salubrious climate, scenic beauty and good
connectivity are chosen for these projects with following basic needs fulfilled
1. Shelter
2. Service and assistance in daily chores
3. Quality healthcare support
4. Safety and Security
5. Company of similar age group
6. Passive and active recreation facilities
7. Entertainment and communication facilities


Opportunities for Real Estate Sector
1. Making effective use of reservations and amenity spaces in a large layout (value addition to
the project)
2. India has favourable demographics (larger working age population) coupled with growing
income levels has created a huge market for quality healthcare and education solutions with
ability to pay. Healthcare insurance penetration is also picking up increasing affordability
3. Providing healthcare and education enhances the positioning of the real estate projects as a
lifestyle destination
4. Generating different income streams – product + service charges (continuous income)
5. Availing Taxation benefits
6. Creating a new entrepreneurial venture
7. Fulfilling Corporate Social Responsibility Motives
8. Enhancing cross-selling opportunities
9. Branding and marketing advantage
10. Improving business for commercial & retail real estate occupants

Significance and Growth Indicators for the times to come
Components of Social Infrastructure

CCRC- Continuous Care Retiring Community



Source: JLL –US India Business Complex


Healthcare – Growth Projections
Increasing private sector participation in
healthcare services is stimulating change in
the Indian healthcare industry. According to
an ICRA industry report on Healthcare, India
spends 5.1 percent of its GDP on health. The
health market is estimated at Rs.1, 408
billion ($30 billion) and includes retail
pharmaceutical, healthcare services, medical
and diagnostic equipment and supplies.
While India‟s overall expenditure on health is
comparable to most developing
countries, India‟s per capita healthcare
expenditure is low due its large billion plus
population and low per capita income.


Healthcare – Market Size
• The US$ 50 billion-a-year health care industry has
grown rapidly and is now the second-largest service-
sector employer in the country, providing jobs to
about 4.5 million people directly or indirectly. The
Indian healthcare sector will double its size to US$
100 billion by 2015, according to ratings agency Fitch.
• By 2020, the Indian healthcare industry is estimated
to be worth US$ 275.6 billion. Currently, 8 per cent of
India‟s GDP is spent on healthcare.
• According to another report „Healthcare Opportunities
in India‟ by UK Trade and Investment (UKTI), India‟s
healthcare industry is estimated to reach US$ 75
billion by 2012 and US$ 150 billion by 2017.
• The health insurance penetration in India is currently
low at 5% vs. ~80% in countries such as the
US, China and Singapore.


Healthcare – Medical Tourism

• According to a new report published by

RNCOS, titled "Booming Medical Tourism in India"

India‟s share in the global medical tourism industry

will reach around 3 per cent by the end of 2013. The

report states that medical tourism is expected to

generate revenue around US$ 3 billion by

2013, growing at a CAGR of around 26 per cent

during 2011–2013. The number of medical tourists is

anticipated to grow at a CAGR of over 19 per cent

during the forecast period to reach 1.3 million by

2013.

The need for its differentiated Real Estate strategies as against the
regulars
Social Infrastructure Business in Real Estate need a different strategy as
A) Structuring of business is very critical on account of :
i. High initial investments
ii. Lower short term returns
iii. Longer payback period
iv. Low capacity of shareholders for capital investment & rental payments
v. Revenue share / profit share model adoption is essential
vi. Risk distribution becomes critical
vii. For profit– Education Institute are still not permitted, trust – based
structure is required


regulars contd…
B. Structuring of business is very critical on account of partnership
with different stakeholders:
i. Financial debt / equity
ii. Operations & maintenance
iii. Management
iv. Technical
C. Regulatory Environment Management
i. Development stage
ii. Management & operations stage


regulars contd…
D. Managing costs and timelines – Price sensitive projects
i. Material procurement
ii. Techniques
iii.Consultants
iv.Operations & maintenance techniques
E. International & domestic collaborations and tie-ups
i. With Universities for Educational Hub
ii. With International Medical Care Institutions for Medical Tourism Hub taking
advantage of our low costs and lack of congestion
iii.With United Nations & other Development Bodies like UNDP, ADB, etc. for
special finance schemes
iv.With Management Institutions for Healthcare and Education Management
considering the special nature of business

regulars contd…
Difficulties in implementation of social infrastructure projects
i. Access to affordable land parcels
ii. Delay in License and Permissions
iii. Access to Soft Finance
iv. Shortage of skilled manpower and specialized management personnels
v. Operations & maintenance techniques
vi. Lack of matching physical infrastructure
vii. Low investment in social infrastructure
viii.Low Penetration of Health Insurance
ix.Lack of effective Public-Private partnership Models


regulars contd…
Suggested Reforms
1. Administrative Reforms
i. Clear responsibility of division under Central, State & Local Self Government Level
ii. Social Infrastructure & Services Commission & its Report on Need & Gaps
iii. Improvement of Insurance Sector

2. Integrating Social Infrastructure in City / Regional Planning with focus on
space earmarking & regulations framework.
i. Higher FAR
ii. Low Development Premium
iii. Self Certification for building plan approval
iv.Single window clearance system
v. Providing matching physical infrastructure – such as transportation, water supply
vi.Property Tax Rebate
vii.Funding provisions through integration of various schemes


regulars contd…
Suggested Reforms contd..
3. Creating a sound institutional framework for effective Public Private
Partnership
i. Provide technical, legal & financial assistance to State & Local Self Government
for effective participation of Private Sector
ii. Encourage projects under PPP through model concession agreement / database
knowledge sharing
iii. Facilitate collaboration between foreign universities / medical colleges /
institutions & large Corporations
iv. Provide various incentives, concessions and tax rebates to social infrastructure
projects through PPP.
v. Unlocking land value by tapping land – based financing sources such as :
• Public hospitals
• Government Colleges & Universities
• Health care centers
vi. Provide clear policy guidelines for user charges & revenue sharing for responsible
business conduct.

Annexure



Senior Living Projects


The Economic Times Presents Social Infrastructure in India Panel Discussion

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