Health Care Real Estate Industry CAGR is projected to be around 12-14% between 2023 and 2028
[Source: JLL India]
The healthcare real estate industry in India is currently at a market size of around USD 123 billion in 2023, per CBRE India.
This blog deep dives into this evolving landscape of healthcare real estate in India, exploring the pre- and post-pandemic scenarios, identifying emerging medical hubs, and highlighting the government's perspective on its contribution to the national economy.
Pre-Covid Era: A Foundation for Growth
Before the pandemic, the Indian healthcare real estate market witnessed steady growth driven by several factors. Firstly, a rising population and increasing life expectancy created a higher demand for healthcare services. Secondly, the growing middle class displayed a willingness to spend more on a private healthcare facility seeking better quality care and improved infrastructure, primarily as a result of higher awareness about insurance. Thirdly, the entry of foreign players, coupled with government initiatives like the National Health Mission, infused additional investments into the sector.
These factors led to the development of various healthcare real estate formats:
- Hospitals: Major hospital chains expanded their footprints, particularly in tier-1 cities like Mumbai, Delhi, and Bangalore.
- Specialised Hospitals: Specialty hospitals focusing on cardiology, oncology, and orthopaedics emerged, catering to specific healthcare needs.
- Diagnostic Centers: Standalone diagnostic centres offering advanced diagnostic tests saw a rise in popularity.
- Medical Colleges and Research Institutes: These institutions require specialized infrastructure, driving demand for educational and research facilities.
Post-Covid Era: A Catalyst for Transformation
The COVID-19 pandemic significantly impacted the healthcare real estate landscape in several ways:
- Increased Demand for Hospital Beds: The pandemic exposed the shortage of hospital beds, leading to an increased focus on building new hospitals and expanding existing ones.
- Surge in Demand for Tier-2 and Tier-3 Cities: As people migrated back to their hometowns, the need for quality healthcare facilities in tier-2 and tier-3 cities became more evident.
- Emergence of Telemedicine: The pandemic accelerated the adoption of telemedicine, influencing the design of healthcare facilities to accommodate virtual consultations and remote monitoring.
- Focus on Hygiene and Safety: Healthcare real estate developers began prioritizing features like improved ventilation systems, isolation wards, and dedicated COVID-19 care facilities.
Emerging Medical Hubs: Beyond Tier-1 Cities
While tier-1 cities remain prominent healthcare hubs, tier-2 and tier-3 cities are increasingly attracting investments. With the healthcare industry expanding, cities like Pune, Jaipur, Lucknow, and Ahmedabad are witnessing the development of:
This shift towards tier-2 and tier-3 cities is driven by:
- Government Initiatives: Schemes like the Pradhan Mantri Jan Arogya Yojana (PMJAY) are increasing healthcare affordability, leading to higher demand within these regions.
- Improved Infrastructure: Investments in infrastructure like improved connectivity and better transportation networks are making these cities more attractive for healthcare providers.
- Availability of Land: Compared to tier-1 cities, tier-2 and tier-3 cities offer readily available land at competitive prices for development projects.
Government's Focus on Healthcare Real Estate
The Indian government recognizes the importance of healthcare real estate in the country's development. Some key initiatives include:
- Public-Private Partnerships (PPPs): Encouraging collaboration between the public and private sectors to create world-class healthcare infrastructure.
- Relaxing Regulations: Streamlining licensing and approval processes to facilitate the speedy development of healthcare facilities.
- Developing Medical Tourism Infrastructure: Upgrading existing infrastructure and creating new facilities to attract medical tourists, contributing to the economy.
Insurance: Highlighting the Growing Awareness
The cost of healthcare in India has been rising, prompting a significant increase in the number of individuals opting for health insurance. This trend highlights the growing recognition that quality healthcare is not a luxury but a necessity. Rising insurance premiums, while a concern, are also indicative of the increasing value placed on comprehensive healthcare coverage.
Government initiatives like Pradhan Mantri Jan Arogya Yojana (PMJAY) have played a vital role in increasing health insurance coverage for millions of low-income individuals, thereby boosting demand for affordable healthcare facilities.
Comparison: India, China, and US
It's important to acknowledge that India still faces a gap in healthcare infrastructure compared to developed countries. While the national average bed-to-population ratio in India is approximately 1.3 per 1,000 people, China boasts 4.3 beds and the US has 2.9 beds per 1,000 people. This highlights the need for continued healthcare investment and development in healthcare real estate to bridge the gap and ensure adequate access to quality and specialised healthcare for all citizens.
Corporate Insurance: A Signal of Growing Awareness
The growing demand for corporate health insurance plans signifies an increasing awareness among individuals and employers regarding the importance of quality healthcare and the focus on family welfare. This trend reflects a shift towards prioritising employee well-being and understanding the long-term benefits associated with a healthy workforce.
Conclusion: A Promising Future for Healthcare Real Estate
The Indian healthcare real estate market is poised for significant growth, driven by rising healthcare needs, increasing investments, and a growing network of medical hubs beyond tier-1 cities. With the rental rate growth rate showing a solid upward trend, and an average annual increase of 5-7% across major cities, per CBRE, investing in healthcare real estate becomes a good option for investors.
The government's focus on fostering this growth further reinforces the sector's potential to contribute to the nation's overall economic development. As the healthcare property landscape continues to evolve, one can expect to see further innovations in healthcare investment, technology integration, and sustainability practices, shaping the future of healthcare delivery in India. This makes the healthcare property market a safe and reliable investment option for investors to consider diversifying their portfolios.
Learn more about investing in healthcare real estate with our investment experts at Strata!
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