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Demand For Leisure Shared Ownership Products To Grow In India – Cushman & Wakefield and Group RCI
14 Jan, 2009, Mumbai
Demand For Leisure Shared Ownership Products To Grow In India
- Timeshare bookings by Indian members increased by 28% in 2008
- Average unit cost per day for a consumer is likely to grow at approximately 4% per annum from 2006 to 2015
- West regions indicate highest timeshare member share followed by south
- Timeshare bookings by Indian members increased by 28% in 2008
- Average unit cost per day for a consumer is likely to grow at approximately 4% per annum from 2006 to 2015
- West regions indicate highest timeshare member share followed by south
Mumbai, January 14, 2009:- The demand for timeshare products in India is expected to grow at an annual growth rate of approximately 16% per annum from 2006 to 2015, largely facilitated by supply growth admeasured at approximately 12% per annum over the same period according to a report released by Group RCI and global real estate consultants, Cushman & Wakefield, "The Spectrum of Leisure Real Estate Products in India". This is further reflected by the growth in holiday exchange bookings that increased by 28% in the period between January to November 2008.
The report, released at HIFI 2009, indicates that the average unit sale for a typical timeshare development is likely to grow at 3% per annum from 2006 to 2015. The average unit cost per day for a consumer is likely to grow at approximately 4% per annum from 2006 to 2015, compared to approximately 5% to 8% for a pure hotel product. However, with an estimated 41,600 pure product hotel rooms across 9 major cities in India that will be furnished over the next four to five years, the markets are likely to see a drop in occupancy rates and a rationalization of average room rates in the long term.
The timeshare industry in India is in its development stage and comprises of approximately 4,640 timeshare units and 146,450 members representing approximately 241,330 timeshare weeks. Of this, the western region in India captured by Mumbai, Pune, Ahmedabad, Surat, etc holds the largest share of members with 42% of the total, followed by south (29%), north (23%) and east (6%).
According to Radhika Shastry, Managing Director, Group RCI, India, "Shared ownership of real estate, where multiple individuals own a share of a piece of real-estate, offers considerable potential for developers, operators and financial institutions. These models of ownership offer increased resilience and buoyancy during fluctuating market conditions. They provide a strong degree of insulation to key stakeholders. In response to a desire for a high quality alternative to a wholly owned second home, without the associated costs, hassles and responsibilities, sales of fractional interests of luxury condominiums, townhouses and single family cottages/ homes have demonstrated a market with considerable untapped demand in India."
Akshay Kulkarni, Director of Cushman & Wakefield Hospitality in South Asia says, "Over the last few years we have seen a keen interest as people had a growth in disposable income and saw value in investing in these alternative assets. With changing economic conditions the focus will shift from profitability to sustainability. Various products will emerge, which will be hybrid models of pure real estate products and transient accommodation models. This will allow end users to not just physically use their investments but also see some appreciation in values over a period of time."
The fractional ownership model is likely to become increasingly popular in the current market environment where an asset may be purchased for a fraction of the cost with associated use plan. The model allows for easy exit and also provides an opportunity for capital gain. The Timeshare model has also gained considerable popularity in the domestic market, driven by the perception of a relatively discounted cost of a holiday at the time of utilization as compared to the hotel product.
The future of the timeshare and fractional ownership products in the Indian real estate market is likely to be governed by several factors including price appreciation in the resale market, the degree to which development financing is available in the future (which has been a major constraint to the growth of the supply in the past and over the short to medium term given the current economic environment), the rate at which consumer awareness of the product increases in the future, the financial success of future projects as well as the extent of long-term return on investment that each product is able to generate, particularly in the current economic environment.
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