Indian HNIs Need to Mull Investing in Branded Residence Segment: Taran Chabra

India’s branded residence is going strength to strength. The South Asian economy is home to 2300+ branded residential units, a sizable share in the global market of 26,000 units, as per the report by SKYE Hospitality Consulting. Demand for trophy assets, chasing high yields, and access to superlative services are fueling growth amongst Indian HNIs to own branded residences. We discussed more about branded residences with Taran Chabra, Director, SKYE Hospitality. Excerpts of the interaction: 

1)      How is the market for branded residences evolving in India?

Branded residence is an extremely potential segment in India just like other parts of the globe such as USA, Middle East, Europe, Turkey, China, and many more locations across the Asia Pacific. As the demand for luxury real estate is on the rise in India, many UHNIs and HNIs are now pouring in their capital to own trophy assets such as branded homes which, not only gives them a sense of elevation but is also a prudent investment choice.

2)     What makes branded residence a lucrative investment option, despite being a high cost asset?

No doubt, branded residence comes at a cost. Our research at SKYE estimates the average value of a unit in the Rs 9-10 crores range, thus implying that the value is higher than those of premium properties. However, such properties yield better price and offer an incremental ROI. Likewise, it can also fetch better lease value, thereby generating a constant flow of rental income. Meanwhile, there is a high degree of assurance associated with branded residences, as prior to inking the deal with a developer, the “Brand” always carries out extensive due diligence, both at a market as well as financial levels. This should assure the investors that their capital investment is safe and risk-free.

3)     What all models are popular in the segment?

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There is a “Branded Name Model”, wherein a leading brand will lend its name to a developer, in lieu of a fee. The license or royalty fee ranges between 3.5% – 6% (this is valid for luxury brands, for non-luxury brands it is considerably lower). The second model is the “Serviced and Managed Amenities Model” in which the brand, generally a hospitality heavy weight will offer a wide-range services in lieu of fee. These services include but are not limited to housekeeping, concierge, valet parking, lounges and cafes, club membership, etc.

4)     Are mostly hospitality companies venturing in the space? Are we also seeing participation from non-hospitality players?

Alongside hospitality, numerous lifestyle and fashion brands are also entering the branded residence space in India, lured by its long-term growth potential. The key hospitality brands in this segment encompass prestigious names such as Leela, Marriott, Four Season, Taj, Trident, Grand Hyatt, etc. Meanwhile amongst the non-hospitality ventures names such as Yoo, Versace, etc. specialize in the segment.

5)     Which state in India leads branded resident market in the country?

As per our research the total size of the branded residence market in India is around Rs 22,800 crores. Around 55% of the projects have been delivered while the remaining are under construction. If we talk volume wise data, Delhi NCR contributes a handsome 41% of the market. This is followed by other cities such as Mumbai (18%), Bangalore (16%), and Pune (12%).

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6)     How do you think the segment will evolve?

The segment will continue to grow and evolve in India, backed by growing concentration of HNIs (750,000) and UHNIs (12,000). There is visible appetite for marquee projects. Homebuyers will be intrigued more by branded residence, which are perceived as a notch above the conventional luxury real estate projects. Apart from Indian homebuyers and investors, NRIs and expat community also show interest in the niche but growing segment.

We have done an assessment of the market potential in our studies and have evaluated that there are more than 100 properties – across the major Indian cities, which can be converted into a branded asset in future. 

7)     What will be SKYE’s role in the new ecosystem?

SKYE shall play a crucial link as a constructive enabler between the three major stakeholders in ecosystem- buyers/investors, brands, and developers. SKYE offers an array of services including market insights, development consultancy, and project feasibility support.

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8)     What all projects are you currently working on?

We have inked a couple of big deals with some leading hospitality brands. We can’t divulge much on this as of now as the transactions are underway and we are bound by the trust of the brand and the developers. However, you shall get to know very soon as it shall be communicated with media and other stakeholders.

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