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Decline in Demand of Service Apartments

Add comment   |   July 3, 2009    10:49am   |Contributed by Indian Realty News

The demand for service apartments has declined in the last few months due to the slowdown. This apart, real estate experts feel that lack of dedicated players and lower hotel room prices too have impacted the demand in this segment. This, however, was not the scene a year ago. “Last year, the boom had resulted in corporates offering a lot of privileges like frequent travels, which had seen a rise in demand for service apartments. However, lately, with the domestic travel reducing and even hotels offering cheaper prices, the demand has dropped a bit. Nevertheless, the industry expects demand for service apartments to rise again in the next six months,” says Jaxay Shah, director, Savvy Infrastructure Limited.

Real estate analysts agree that the option of service apartment is better than hotels as far as corporates are concerned. “Service apartments carry facilities that support stay with a duration of 15 days as well as over six months. Compared with that, staying in hotels tend to be costlier. Longer stay, however, is being ruled out by corporates as of now. Rather, they are now relying on video conferencing and other cost effective means,” says Ashutosh Limayi, associate director, strategic consulting at John Lang LaSalle Meghraj (JLLM), a real estate consulting firm.

According to SK Sayal, chief executive officer and director of Delhi based Alpha G: Corp Development Private Limited, the segment also lacks seasoned players. “Since service apartments require more facilities that can be offered over a period of time, ranging from 15 days to over six months, there are not many specialists in the industry. As compared with global markets, India still lacks dedicated service apartment providers and hence, hospitality players are complementing it with their hotels. Even our upcoming hotel project in Ahmedabad might complement service apartment need in the market,” points out Sayal.

Ahmedabad-based Neesa Leisure, which operates service apartments in Gurgaon and Jaipur, is also wary of the market. “We have a couple of properties in Ahmedabad and one in Gandhinagar. However, another service apartment is yet to be planned,” says Arvind Gupta, managing director of Neesa Leisure Limited. Industry estimates reveal that the investment in service apartment is over Rs 20 lakh per room.

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