Healthcare on the Town

With the real-estate boom in India and upcoming townships, corporate healthcare is streaming into community care. Nancy Singh reports on the exciting development plans ahead

Browse through the development plans of all the big real-estate groups and you are bound to see them announcing tie-ups with some healthcare giants. This shows how corporate healthcare is streaming into community care. Fortis, Apollo, Global Hospitals, Columbia Asia, Hiranandani, Elbit, Hinduja Group, Sahara Group have all jumped on the bandwagon.

Boomtown

Despite the tightening of interest rates, the real estate market in India continues to grow at the rate of 30 per cent every year. Given the scarcity of space, the next big wave would be planned integrated townships. Analysts expect the Indian real estate market to expand by more than three times to touch $60 billion by 2010 from the present $16 billion. India has an existing demand-supply gap of more than 24 million units, attracting companies from across the globe to invest in the country. The rising share of Foreign Direct Investment (FDI) is further driving the growth in this sector. According to a recent study by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the share of real estate sector in the total FDI stood at $8 billion in 2006-07, which is up by 10 per cent from 16 per cent in 2005-06. The share of foreign investments is expected to touch $25 billion-$28 billion, out of the total market size of $60 billion by 2010. In such a scenario, it obviously makes business sense when healthcare groups tie-up with these giants.

The move is also viewed as an effective means to mark a significant presence in tier-II cities. "These corporates want to flourish and it makes business sense to involve an expert in that core area. Also, it is a myth that the semi-metro population does not have a high paying capacity. In fact, the hospitals in these areas are getting filled faster than the ones in metro cities," says Vivek Desai, MD, HOSMAC India, Mumbai.

The medical expertise of Apollo will enable us to provide world-class healthcare facilities at Lavasa

- Ajit Gulabchand
Chairman
Lavasa Corporation

A tie-up saves infrastructure cost, makes land easily
available and gives exclusive access

- Sandeep Sinha
Programme Manager-Healthcare Practice
Frost & Sullivan

Ready Market

One of the many groups inking such deals is DLF-Fortis. Real estate giant DLF has entered into an agreement for floating a joint venture with Fortis Healthcare to set up hospitals across the country with an investment of around Rs 6,200 crore. Fortis will have a majority holding with 74 per cent stake in the proposed JV, with DLF holding the rest. The deal is for a chain of 200-450 bed hospitals in 31 cities in India within three to five years. For Fortis, the move is a part of its bigger strategy for a pan-India presence in the healthcare segment, while resolving real estate problems for setting up new hospitals. "The tie-ups are a good way to access huge banks of lands. In townships, we get a population base which can avail our services," says Daljit Singh, President-Strategy & Organisational Development, Fortis Healthcare Limited. DLF already has a land reserve of 10,255 acres in 31 cities.

Another significant deal is of Lavasa Corporation with the Apollo Hospitals Group, to set up an integrated healthcare and wellness destination at Lavasa Hill town near Pune. The services will be spread over 200 acres of land. The first plan will be to establish a multi-speciality hospital with a capacity of 50 beds, expected to open by 2009. Eventually, the services will extend to wellness services. The integrated hospital and wellness centre will have four major service verticals—medical cluster, wellness cluster, long-term care and education, research and development zone.

Says Ajit Gulabchand, Chairman of Lavasa Corporation, "The medical expertise of Apollo will enable us to provide world-class healthcare facilities at Lavasa and improve the quality of life of its residents. With their vast experience in this field, Apollo brings both international best practices as well as a stellar track record."

Another case in point is Global Hospitals which has tied up with Kolkata-based Surekha Constructions for a multi-organ transplant centre in its township. Says Pradeep Surekha, MD, Surekha Constructions, "It benefits both ways to have a large corporate healthcare for a township with 40,000-50,000 people. Healthcare is vital to make a township successful and create a total composite project. Considering that in the area of healthcare we don't have expertise, it is in our interest to outsource it."

Snapshots

Rs 6,200 cr

Who: Fortis Healthcare
What: Entered in to a JV with DLF and tie-up with Ansal Properties.
Money matters: Rs 6,200 crore.
Plans: To set up a chain of 200-450 bed hospitals in 31 cities in India within three to five years. The planned investment would go toward meeting cost of land, construction and medical equipment. The JV plans to build hospitals in cities where DLF has a presence.
With Ansal Properties, Fortis has signed an agreement for setting up a Medicity at its Sushant Golf City Project in Lucknow.

Rs 200 cr

Who: Apollo Group
What: To set up a wellness centre in a tie-up with Lake City. Corporation promoted by Hindustan Construction (HCC).
Money matters: Rs 200 crore.
Plans: To set up medical, wellness facilities and care for the elderly. The services will spread over 200 acres of land at the Lavasa Hill town near Pune. Initially, the plan is to establish a multi-speciality hospital with a capacity of 50 beds which will be ready by 2009. Eventually, the services will extend to wellness services, rejuvenation, long-term care, research and development.
Plans to develop a destination for healthcare and wellness services, research and development and medical education. The services will cater to both the Indian population and
foreigners.

$1 bn

Who: Hinduja Group
What: Tie-up with Dubai Government-owned Limitless LLC.
Money Matters: Around $1 billion.
Plans: To start a chain of hospitals. The initial phase of two-three years will set up medicities in New Delhi, Mumbai, Bangalore and Hyderabad with about 2,000 beds. Apart from hospitals, it also will offer nursing schools and other services like clinical trials.

Rs 3,000 cr

Who: Columbia Asia
What: Tie-up with Brigade Group.
Money Matters: Rs 3,000-crore investment.
Plans: Brigade Group would develop 12 real estate projects in Bangalore and Mysore, including a 'lifestyle enclave'. A 30-storied office complex space spread over one million square feet in the lifestyle enclave would include a 152-bed hospital that would be run by Columbia Asia and retail shopping mall with an 11-screen multiplex to be set up by the PVR Group.

Give it to the Experts

Hinduja Healthcare is not far behind in this trend. It is planning to start a chain of hospitals in India with an investment of $1 billion in a tie-up with Dubai Government-owned Limitless LLC, a subsidiary of Dubai World. The investment of $1 billion would be for the initial phase of two-three years of the project that seeks to set up medicities in Delhi, Mumbai, Bangalore and Hyderabad with about 2,000 beds. The Company could probably look at applying for an SEZ status for these medicities. Apart from healthcare, it will also offer nursing schools and other services like clinical trials. The joint venture will also create centres of excellence in medicare and would move to smaller cities and towns in the second phase.

The revenue model of these tie-ups differs from case to case, but the most common practice is on a lease basis. "Right now, it is more on a lease to lease basis where the operations team and investment team (real estate) prefer to function separately, and it is usually favoured by both the parties," says Anupam Verma, CEO, Khar Project, Hinduja Healthcare.

Reportedly, Columbia Asia, Bangalore is also slated to tie-up with the 300-crore Prestige Group, Bangalore's new integrated township. When contacted, the management of Columbia Asia was noncommittal. "We are still in talks," said Tufan Ghosh, CEO, Columbia Asia. Prestige Group has to its credit around 120 completed developments, covering over 10 million square feet of commercial and residential area. Some big developments include the UB City, Prestige Shantiniketan and Prestige Technology Park, all in Bangalore.

Meanwhile, Columbia Asia has tied up with the Brigade Group, with an investment of Rs 3,000-crore, to develop 12 real estate projects in Bangalore and Mysore, including a 'lifestyle enclave'. A 30-storied office complex space spread over one million square feet in the lifestyle enclave would include a 152-bed hospital to be run by Columbia Asia, and retail shopping mall with an 11-screen multiplex to be set up by the PVR Group, both of whom would be anchor tenants. The Group's existing land bank in South India is reportedly over 500 acres.

"Large real estate groups without a healthcare facility
are considered incomplete"

- Anupam Verma
CEO, Khar Project
Hinduja Healthcare

"We would now be constructing a Hospital for Fortis at Navi Mumbai"

- Niranjan Hiranandani
MD
Hiranandani Group

Fulfilling Obligations

From the perspective of property, the construction companies who set up townships are obligated to set up basic infrastructure or amenities like schools, hospitals and entertainment. Verma explains, "Large real estate groups without a healthcare facility are considered incomplete."

It is under this basic obligation that they try to rope in the best names in the industry to boost their commercial value, since they lack the technical expertise to run a hospital themselves. Says Singh, "The main reason that developers prefer outsourcing these services is the sheer lack of expertise in this arena. For us, it also means avoiding legal hassles, as they are the ones who buy, consolidate, and they are the real talent in terms of land. It is thus the best of both worlds. It is a win-win situation for both."

It is also a good branding strategy for the developers. Dr Narottam Puri, Former Executive Director, Max Healthcare, agrees, "The commercial value of that property shoots up and it definitely adds value to their image and improves brand value if they manage to get a good name from the industry."

Another reason that healthcare would happily join hands is when they are looking out to stretch wings for expansion. "When the hospital wants to expand, they realise that they do not have any real-estate experience and hence would rather partner with an old hand. And, in a township, it is also light on the hospital's pocket when the land is on a lease basis. Thus, the hospital saves crores by eliminating huge capital costs," explains Dr Akash Rajpal, Senior Manager, Medical Services, Dr LH Hiranandani Hospital, Mumbai.

Sandeep Sinha, Programme Manager, Healthcare Practice, Frost & Sullivan sums it up, "A hospital would go for such tie-ups first to save on cost of setting up infrastructure, second, the easy availability of land and third, the availability of potential customers (patients), with whom you will have exclusivity and easy accessibility."

Booming Cities

The Potential township destination cities

• Bangalore
• Chennai
• Pune
• Panipat
• Mumbai
• Delhi-NCR
• Jaipur
• Chandigarh
• Lucknow
• Kolkata

In-house or Outsource?

While outsourcing is the norm, construction groups like Hiranandani and Raheja are exceptions who went ahead and started their own in-house healthcare services. Which one is a better deal—to outsource or to have in-house services? What made these groups take a different route? Niranjan Hiranandani, MD, Hiranandani Group argues, "If I ask you which mode would you prefer, chances are, you will say in-house. I think it's always a good idea to have an in-house management. However, the end result is the same. For example, for a printout, I may have a printer of my own or give it to somebody else. It isn't wrong to outsource. If you want to focus on your core area, then people should definitely outsource their non-core areas. Both methods are fine."

However, market pundits believe that in the case of Hiranandani or Raheja, the prime advantage was that they had a doctor in their family. As Dr Puri reminds us, "When people talk about Hiranandani they forget that this family had two doctors in the family—one their father Dr LH Hiranandani and other was his son, the late Dr Naveen Hiranandani."

Dr Rajpal concurs, "The father of the Hiranandani brothers is a renowned doctor, who brought in his expertise and the best experts to start this Hospital. The brothers thus always had a reference point." However, Niranjan asserts, "I do not believe that it is important to have expertise in what you build or manage. My father was a doctor, but that was not very crucial in managing, building or running the Hospital."

Building in-house hospitals has indeed worked for Hiranandani, now that it is building hospitals for other groups, like Fortis for whom it is constructing a hospital in Navi Mumbai. "Apart from this, three to four big healthcare groups have already shown a keen interest in such a venture," reveals Dr Rajpal.

It is rather difficult to choose the best route, as both methods seem to work and make good business sense. However, Surekha believes the decision to go in-house or outsource is dependent upon personal interest in that domain. "I do not think in-house is a problem but the groups which have done that wanted to get into a new business and learn the ropes," he avers.

Future is Bright

Be it in-house or outsourced, the fact is that corporate healthcare has indeed arrived and is bound to have a significant presence in the next five years in such townships. "Tertiary care hospitals will set up their secondary care unit in these townships and use these facilities as their referral. In the future, you will find many such projects coming up in metros and mini-metros across India," says Sinha.

Prominent cities with potential are Bangalore, Chennai, Mumbai, Pune, Hyderabad, Chandigarh and NCR, where the real estate market is trying to stretch its geographical boundaries to the maximum extent, say analysts.

As of today, billions of rupees are already invested for essential and crucial services of these giant townships. The rays of the sunrise sector are shining bright on the golden land.

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