Spreading their wings
HT Estates, May 9, 2009, Page 1
A slow moving property market has got sever al developers interest ed in businesses such as education and healthcare.
Diversification is being seen as the way out of the liquidity crunch, a means to bring in the much-needed cash flow. A foray into these so-called “safe” sectors is also a strategy to enhance the value of their core real estate business and draw buyers waiting in the wings to their townships.
While some firms have begun the sale of their noncore assets such as school and hospital plots on existing land banks to generate immediate cash flow, others are looking at these two sectors as a longterm opportunity.
Developers have realised that any residential township needs to have a mix of quality schools, hospitals and basic infrastructure such as power, telecom, water and sewage facilities to become a success. They are, therefore, looking at these verticals as money-spinners and opportunities that create a natural hedge within the group in times of a downturn. The premise is that people would continue to pay for quality education and healthcare.
Designing businesses around necessities is, therefore, the key to success — a natural and sustainable progression.
The popular model being adopted is that of a joint venture wherein the developer provides the basic infrastructure and specialists take over to run the facility. Realty experts say that developers going the JV way should look at a gestation period of 7-9 years before they start to get returns. The other way out is to sell a land parcel and immediately exit. This is comparatively an easy game as it brings in instant liquidity and works as long as the returns are good.
Turning adversity into opportunity
The huge demand supply gap is attracting realty players towards the education sector. While Unitech has announced the sale of school plots varying from 1000 yards to 5 acres for nursery primary and high , schools in South City II, Nirvana Country and Greenwood City, AEZ has recently acquired a 50 per cent stake in Mother’s Pride to help the education group in infrastructure development. The Gujarat government recently allotted 750 acres to Anantraj industries to develop an education city on the Ahmedabad Mehsana highway and Omega Realty, Ahmedabad, plans to set up business schools to be named United World School of Business with a proposed investment of Rs 105 crore.
According to Sanjeev J Aeren, MD, AEZ Group, “It makes business sense for realty players to get into creation of infrastructure for the education sector in these times.
For us, diversification has been a well thought-out strategy and we had started working on it even before the market had witnessed a slowdown.
Besides, diversification into this segment is a foray into more or less a recession-proof sector and is aimed at creating synergies in our fields.”
“The education sector offers tremendous growth potential. There is a shortage of supply in the education sector that we can successfully cater to. However, having been in the education sector for over 20 years now, it would not be fair to say that this is a path taken to overcome the liquidity crunch or beat the current market conditions as it is not a new venture for us. All our education initiatives are under the Chiranjeev Charitable Trust and not under Ansal API. The Trust is looking at investing about 200 crore in higher education in the near future,” points out Pranav Ansal, Vice Chairman and Managing Director, Ansal API. The group started its first school, Chiranjeev Bharti School in Gurgaon in 1991. Today it has three schools in Gurgaon with 4000 students. It runs the Sushant School of Art and Architecture and Ansal Institute of Technology It also has a tie up with e-learning service provider Educomp.
Jaypee Group has its own education division that is into developing schools and engineering institutes.
“Education institutes are a On the health highway Besides education, there are realty firms that are eyeing the healthcare pie. Both education and healthcare are an extension of realtors committing money on golf courses, entertainment facilities, power plants, telecom etc, during the bull run. Basic necessities are today seen as money-spinners, businesses not affected by cycles and a natural hedge within the group. The premise is that when your core is lying low and there is not much activity, the focus should be on getting the ancillary right.
Healthcare is a different ball game and works on specialised skill sets. The success of a healthcare facility in any township depends on brands and on renowned doctors who can draw crowds. There have been companies who've set up healthcare verticals prior to the slowdown and those who are considering it as an important component in their integrated townships.
“We are drawing up a healthcare strategy. We'll be constructing a super speciality, 450-bedded hospital in our township in Noida. This would be run by our own vertical. The hospital is slated to open in 2011,” reveals Dixit.
According to Harsh Neotia, Chairman of Ambuja Realty Development Ltd, “Our group got involved with healthcare and education much before the slowdown, these businesses have, therefore, not been prompted by recessionary trends but driven by our own interest in these two sectors. We've been into healthcare for the last seven years. We are currently constructing two super speciality hospitals in Siliguri and in Kolkata. For the Siliguri Integrated Township there is a multispeciality hospital project that will take two years to complete. My view is that one should get into different businesses based on one's understanding of the business and a credible partner.” The Emami group also has a separate healthcare vertical. The group is building several super speciality hospitals in Kolkata and one in Bhubaneswer under the brand name Amri hospitals.
D.N.Agarwal, Executive Director of AMRI Hospitals, says that though there are opportunities for realty players in the healthcare sector, those wanting to get into it should tread carefully as it is a long-term investment and manpower intensive. It's not simply about constructing a building, he adds. must for any integrated township. We plan to build a J P International School on our Noida project. Besides, there will be at least 15-20 schools inside the township,” says Rita Dixit, Executive Director, Jaypee Greens.
The business of education
HT Estates, May 9, 2009, Page 1
A slow moving property market has got sever al developers interest ed in businesses such as education and healthcare.
Diversification is being seen as the way out of the liquidity crunch, a means to bring in the much-needed cash flow. A foray into these so-called “safe” sectors is also a strategy to enhance the value of their core real estate business and draw buyers waiting in the wings to their townships.
While some firms have begun the sale of their noncore assets such as school and hospital plots on existing land banks to generate immediate cash flow, others are looking at these two sectors as a longterm opportunity.
Developers have realised that any residential township needs to have a mix of quality schools, hospitals and basic infrastructure such as power, telecom, water and sewage facilities to become a success. They are, therefore, looking at these verticals as money-spinners and opportunities that create a natural hedge within the group in times of a downturn. The premise is that people would continue to pay for quality education and healthcare.
Designing businesses around necessities is, therefore, the key to success — a natural and sustainable progression.
The popular model being adopted is that of a joint venture wherein the developer provides the basic infrastructure and specialists take over to run the facility. Realty experts say that developers going the JV way should look at a gestation period of 7-9 years before they start to get returns. The other way out is to sell a land parcel and immediately exit. This is comparatively an easy game as it brings in instant liquidity and works as long as the returns are good.
Turning adversity into opportunity
The huge demand supply gap is attracting realty players towards the education sector. While Unitech has announced the sale of school plots varying from 1000 yards to 5 acres for nursery primary and high , schools in South City II, Nirvana Country and Greenwood City, AEZ has recently acquired a 50 per cent stake in Mother’s Pride to help the education group in infrastructure development. The Gujarat government recently allotted 750 acres to Anantraj industries to develop an education city on the Ahmedabad Mehsana highway and Omega Realty, Ahmedabad, plans to set up business schools to be named United World School of Business with a proposed investment of Rs 105 crore.
According to Sanjeev J Aeren, MD, AEZ Group, “It makes business sense for realty players to get into creation of infrastructure for the education sector in these times.
For us, diversification has been a well thought-out strategy and we had started working on it even before the market had witnessed a slowdown.
Besides, diversification into this segment is a foray into more or less a recession-proof sector and is aimed at creating synergies in our fields.”
“The education sector offers tremendous growth potential. There is a shortage of supply in the education sector that we can successfully cater to. However, having been in the education sector for over 20 years now, it would not be fair to say that this is a path taken to overcome the liquidity crunch or beat the current market conditions as it is not a new venture for us. All our education initiatives are under the Chiranjeev Charitable Trust and not under Ansal API. The Trust is looking at investing about 200 crore in higher education in the near future,” points out Pranav Ansal, Vice Chairman and Managing Director, Ansal API. The group started its first school, Chiranjeev Bharti School in Gurgaon in 1991. Today it has three schools in Gurgaon with 4000 students. It runs the Sushant School of Art and Architecture and Ansal Institute of Technology It also has a tie up with e-learning service provider Educomp.
Jaypee Group has its own education division that is into developing schools and engineering institutes.
“Education institutes are a On the health highway Besides education, there are realty firms that are eyeing the healthcare pie. Both education and healthcare are an extension of realtors committing money on golf courses, entertainment facilities, power plants, telecom etc, during the bull run. Basic necessities are today seen as money-spinners, businesses not affected by cycles and a natural hedge within the group. The premise is that when your core is lying low and there is not much activity, the focus should be on getting the ancillary right.
Healthcare is a different ball game and works on specialised skill sets. The success of a healthcare facility in any township depends on brands and on renowned doctors who can draw crowds. There have been companies who've set up healthcare verticals prior to the slowdown and those who are considering it as an important component in their integrated townships.
“We are drawing up a healthcare strategy. We'll be constructing a super speciality, 450-bedded hospital in our township in Noida. This would be run by our own vertical. The hospital is slated to open in 2011,” reveals Dixit.
According to Harsh Neotia, Chairman of Ambuja Realty Development Ltd, “Our group got involved with healthcare and education much before the slowdown, these businesses have, therefore, not been prompted by recessionary trends but driven by our own interest in these two sectors. We've been into healthcare for the last seven years. We are currently constructing two super speciality hospitals in Siliguri and in Kolkata. For the Siliguri Integrated Township there is a multispeciality hospital project that will take two years to complete. My view is that one should get into different businesses based on one's understanding of the business and a credible partner.” The Emami group also has a separate healthcare vertical. The group is building several super speciality hospitals in Kolkata and one in Bhubaneswer under the brand name Amri hospitals.
D.N.Agarwal, Executive Director of AMRI Hospitals, says that though there are opportunities for realty players in the healthcare sector, those wanting to get into it should tread carefully as it is a long-term investment and manpower intensive. It's not simply about constructing a building, he adds. must for any integrated township. We plan to build a J P International School on our Noida project. Besides, there will be at least 15-20 schools inside the township,” says Rita Dixit, Executive Director, Jaypee Greens.
The business of education
Post slowdown, realtors are looking at education as an anchor to draw in population to their integrated townships.
Experts say that the model may operate well typically in a franchisee context. Education runs on brand or expertise and anchors help in drawing population. Many properties do not get sold because of lack of basic infrastructure such as power, roads, healthcare or education. Once these are provided, those waiting in the wings may be drawn to the townships.
Even in education, not all institutes are profitable. While the K plus 2 level is highly regularised, the play school and the PG diploma sector that requires specialised skill sets is highly profitable. These two segments are, therefore, clear opportunities, points out Ajit Krishnan, partner, Ernst & Young.
Also, there may be land parcels in integrated townships still vacant but earmarked for schools. This may be an opportunity to get rid of idle inventory and put it to profitable use, he adds.
Concurs Anuj Puri, Chairman and country head of Jones Lang LaSalle Meghraj; education is a recession proof sector and developers are looking at providing infrastructure to players in this segment.
“Foray into education or for that matter health care is more of an opportunistic play and a long term play at that. Realtors venturing into these sectors should look at a gestation period of 7-9 years before they can start looking at returns."
Realtors are seeing a steady revenue income from these ventures. If there is demand and a reasonable price on offer, things can work well in a joint venture, says Kaustav Roy, Director (tenant strategies), Cushman & Wakefield, India.
Agrees Sharad Aggarwal, president, Educomp. “Schools can be built by real estate companies but they also need to be run by experts. Joint ventures in this direction are an opportunity as long as both understand each other and are into a mutually beneficial relationship.”
Experts say that the model may operate well typically in a franchisee context. Education runs on brand or expertise and anchors help in drawing population. Many properties do not get sold because of lack of basic infrastructure such as power, roads, healthcare or education. Once these are provided, those waiting in the wings may be drawn to the townships.
Even in education, not all institutes are profitable. While the K plus 2 level is highly regularised, the play school and the PG diploma sector that requires specialised skill sets is highly profitable. These two segments are, therefore, clear opportunities, points out Ajit Krishnan, partner, Ernst & Young.
Also, there may be land parcels in integrated townships still vacant but earmarked for schools. This may be an opportunity to get rid of idle inventory and put it to profitable use, he adds.
Concurs Anuj Puri, Chairman and country head of Jones Lang LaSalle Meghraj; education is a recession proof sector and developers are looking at providing infrastructure to players in this segment.
“Foray into education or for that matter health care is more of an opportunistic play and a long term play at that. Realtors venturing into these sectors should look at a gestation period of 7-9 years before they can start looking at returns."
Realtors are seeing a steady revenue income from these ventures. If there is demand and a reasonable price on offer, things can work well in a joint venture, says Kaustav Roy, Director (tenant strategies), Cushman & Wakefield, India.
Agrees Sharad Aggarwal, president, Educomp. “Schools can be built by real estate companies but they also need to be run by experts. Joint ventures in this direction are an opportunity as long as both understand each other and are into a mutually beneficial relationship.”
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Buying real estate bargain properties can be a great way to make a large profit. If you take the time to do your research and select the property carefully, you can make a great deal of money.
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