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
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

Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer

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