In order to support expansion in the expanding healthcare market, the top hospital chains in India are changing their approach and placing more emphasis on smaller locations and facilities. This change is a reaction to the difficulties brought about by the nation’s urban areas’ limited land supply and growing real estate costs.
In the post-COVID-19 era, patient preferences are changing despite a chronic lack of healthcare facilities in many parts of India, especially in towns and smaller cities. There is a discernible preference for specialized but easily accessible amenities. Hospital chains’ calculated decision to concentrate on smaller facilities is in line with this shifting environment, enabling them to satisfy the need for specialized services while overcoming the challenges presented by the high cost of real estate and the scarcity of land in cities.
This pattern is anticipated to serve as the cornerstone of demand in the Indian healthcare sector, which is projected by international consulting firms B Capital and Boston Consulting Group to nearly triple in size over the next eight years, reaching $458 billion in 2030.
Temasek-owned Manipal’s Managing Director and Chief Executive Officer Dilip Jose stated, “We don’t build facilities with 600-700 beds anymore as you have to be catering to a micro market,” emphasizing the hospital chain’s intention to concentrate on facilities with 250–325 beds, which is India’s second-largest.
The alteration also reflects problems with the infrastructure.
According to a research by US partner Berkadia and property consultancy Knight Frank, India currently has 1.3 hospital beds per 1000 people, much less than the 3 beds per 1000 population that the World Health Organization recommends. This shortcoming draws attention to a significant hole in the healthcare system.
An extra 2.4 million hospital beds would be required in India to meet the recommended standard. The report also highlights the need for an additional 2 billion square feet of healthcare space in the nation to effectively serve its 1.42 billion inhabitants. This emphasizes how urgently the nation’s healthcare infrastructure needs to be expanded and invested in in order to close the current deficit and meet the rising demand for medical services.
Indian healthcare providers are modifying their approaches to optimize efficacy and economy. The trend towards bringing healthcare services closer to consumers is primarily driven by economies of scale, according to Saurabh Mehrotra, Executive Director of Valuation and Advisory at Knight Frank India. The ideal size for efficiency is between 300 and 350 beds.
The erratic nature of real estate prices is the reason for this change in approach. Certain hospital chains are adjusting their strategies to deal with the difficulties caused by shifting real estate costs. One such chain is Fortis Healthcare, which is partly owned by IHH Healthcare of Malaysia. Healthcare providers hope to improve cost-effectiveness and guarantee sustainable growth in the face of rising healthcare costs by modifying their operational models and concentrating on more moderate-sized facilities.
In order to increase productivity and cut costs, Indian healthcare providers are changing their approaches. The decision to move healthcare services closer to patients is primarily motivated by economies of scale, according to Saurabh Mehrotra, Executive Director of Valuation and Advisory at Knight Frank India. A hospital with 300–350 beds is the ideal size for efficiency.
This change in approach is a reaction to the erratic nature of property values. Certain healthcare chains, like Fortis Healthcare, which is partly owned by IHH Healthcare of Malaysia, are modifying their strategy to deal with the difficulties brought on by volatile real estate prices. The goal of healthcare providers’ revised operational models, which concentrate on more moderately sized facilities, is to improve cost-effectiveness and guarantee sustainable growth in the face of the dynamic real estate landscape.
While Rainbow will concentrate on growing in the smaller cities of Andhra Pradesh and Tamil Nadu, the largest private hospital chain in India, Apollo Hospitals (APLH.NS), plans to add 2,860 beds over the next three years, including in Tier 2 cities like Mysore and Varanasi.
Many significant Indian healthcare providers are moving toward an asset-light approach, which keeps ownership of real estate and buildings separate from their accounting records. According to Saurabh Mehrotra of Knight Frank, this shift has forced commercial real estate companies to modify their strategy. These days, developers are more receptive to “build-to-lease” agreements, in which they build medical facilities and lease them to providers for periods of 20–30 years. This change departs from the conventional model of building properties with the intention of selling and gives developers more visibility into cash flow.
