Saturday Brain Storming Thought (168) 22/04/2023
Service Apartment
Service Apartment is a fully furnished apartment, available for both short term and long term stays, providing amenities for daily use, housekeeping and a range of other services, all included within the rental price
Stay in Service Apartment
You can stay as long as necessary when you have booked a service apartment
That gives you flexibility to do whatever you want, whenever it suits you
Another name for service apartment
Aparthotel, that is apartments within a dedicated building in the housing complex with all the aforementioned amenities
Cooking in Service Apartment
Staying in a service apartment gives you the room to work, cook, relax and sleep on average you can expect to enjoy 50% more space than an equivalent standard of hotel
A typical one-bedroom service apartment is around twice the size of average hotel room
Disadvantages of Service Apartment
1) lack of aesthetics
2) maintenance issues
3) absence of equipment
4) unsuitable location
5) steep pricing
Core services required in service apartment
1) fully furnished and equipped apartment unit
2) housekeeping services
3) utilities such as electricity, water, Wifi
4) fitness centre
5) swimming pool
6) 24 hours security
7) grocery delivery
8) airport transfer
Reasons to choose service apartment over hotel
1) you will feel at home
2) you will save money
3) you will have more space
4) you will dodge hotel death
5) you will travel in a mor sustainable way
6) you will get all the services of hotel
Service Apartment can be a good investment
Service Apartment tends to offer larger, better’value accomodation than a hotel with a range of amenities, innovative facilities and personalized services
Their proximity to business centers and good connectivity leads to a higher rental income and capital appreciation
Maintenance and other costs for service apartment
Local laundry services, wear and tear for such properties is far more because of the constant flow of different individuals
Origin of Service Apartment
Service Apartment are a segment in the hospitality and residential business sector
Service Apartment concept is originated in the United States, where business travellers, freelancers and newcomers make use of such flexible accomodation to arrive on time for their respective assignments and projects
Self Service Apartment
Self Service Apartment usually have a fully equipped kitchen and laundry, lounge room and one or two bedrooms, so are particularly convenient for families, as meals can be prepared in the apartment
Tax rate for service apartment
GST on service apartment, approximately 18% of total annual income
If service apartment rented on monthly basis, GST is determined and charged on the total rent amount
Legal definition of service apartment
Service Apartment means a lodging house in which each sleeping apartment, or group of sleeping apartment in common occupancy, is provided with its own sanitary conveniences and may have its own cooking facilities
Restrictions for service apartment determined by national guidelines
1) a maximum number of people allowed to ensure adequate physical distancing
2) fabric mask policies required by local or national regulations
3) hand washing stations, especially in the toilet and change room areas
4) single use towels only
5) a bin for guests to place their towel after use for laundering
6) individual use drinking water
7) tissues and waste containers with lids
8) high touch areas such as door handles disinfected regularly throughout the day
Need of future – service apartment necessity in India
1) growth in foreign tourist
2) growth in corporate, business and leisure travelers across the country
3) overall national and economic growth
Global Scenario of service apartment
+ 3000 accomodations available in UK including more than 1000 in London in year 2016
+ 80000 expected in year 2020
Service Apartment in India
Metro cities including Mumbai, Delhi, Bangalore, Hyderabad and Pune
Investment analysis of service apartment in India
1) banks are less inclined to lend against service apartment
2) purchasers need a larger deposit to purchase a service apartment
3) normally 6% to 7% yield on investment with low vecancy rates
4) possibility of leaseback agreement with hotels
5) service apartment are sold on the assurance of strong rental yield
Strong Market drivers for service apartment industry
1) having a loyal customer base
2) product is located in a high profile location
3) effective product promotion
4) Referral word of mouth
5) industry recognition and partnership agreement
Legal and Regulatory issues for service apartment
1) zoning restrictions
2) fluctuations in demands and social expectations
3) growth of interest in sharing of residential properties
Sustainability of service apartment
1) longer stays with reducing travel need
2) Co-living – it makes group trips and work projects much easier
3) transportation sharing
4) sustainable housekeeping
5) weekly cleaning and housekeeping reduces electricity use
6) one month stay reduces 50% hotel cost
7) service apartment use 40% less water than hotel
Guidelines to start service apartment business
1) make potential areas for starting a service apartment
2) identify area to start service apartment
3) visit all service apartment in identified area
Make study of
Room pricing
Discount for long stay
Observe furnishing
Observe staff
Check cleanliness
Furniture list
4) calculate the capital expense required to set up a service apartment
Deposit required
Estimate cost required to furnish
Working capital etc
5) visit all the potential corporate in the identified area
Google companies
Corporates
Admin and HR call
Knock the door & visit
Customer expectations
6) plan for manpower
Identify manpower
One cook and helper
7) fix your room pricing
Based on a competition survey done
8) identify, finalise the property, and sign a rental agreement
Rooms With attached toilets
Focus on room and food services
Rules and Regulations required to run service apartment in India
1) police permit – since it’s a commercial activity
2) NOC required from society
3) municipal authority is also required to give permission
4) restaurant licence for common kitchen
5) fire safety permission
Rental Yield for residential properties are 3% to 4%
Rental Yield for service apartment may be 8% to 10%
Compiled by:
Er. Avinash Kulkarni
9822011051
Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer