The Indian healthcare sector is experiencing a noteworthy evolution, with real estate emerging as a pivotal factor in its expansion journey. According to a report by Knight Frank, India requires approximately 2 billion square feet of healthcare infrastructure to adequately serve its current population of 1.42 billion. Consequently, the healthcare real estate sector is swiftly expanding to address this demand and facilitate the alignment of the economy with global standards.

The healthcare real estate industry in India reached a market size of approximately USD 123 billion in 2023, as reported by CBRE India.

This blog delves into the evolving landscape of healthcare real estate in India, examining the situations before and after the pandemic, pinpointing emerging medical hubs, and shedding light on the government's viewpoint regarding its impact on the national economy.

Pre-Covid Era: Laying the Groundwork for Expansion

Before the pandemic, the Indian healthcare real estate market experienced consistent growth propelled by several factors. Firstly, a burgeoning population and longer life expectancy led to heightened demand for healthcare services. Secondly, the expanding middle class demonstrated a readiness to invest more in private healthcare facilities, seeking superior quality care and upgraded infrastructure, largely due to increased awareness about insurance. Thirdly, the influx of foreign players, along with government initiatives such as the National Health Mission, injected additional investments into the sector.

These factors spurred the development of various healthcare real estate formats:

  • Hospitals: Leading hospital chains expanded their presence, notably in tier-1 cities such as Mumbai, Delhi, and Bangalore.
  • Specialized Hospitals: Specialized facilities concentrating on areas like cardiology, oncology, and orthopedics emerged to address specific healthcare requirements.
  • Diagnostic Centers: Standalone diagnostic centers offering advanced tests experienced a surge in demand.
  • Medical Colleges and Research Institutes: These institutions necessitate specialized infrastructure, fueling the need for educational and research facilities.

Post-Covid Era: A Driver for Change

The COVID-19 pandemic brought about significant shifts in the healthcare real estate sector:

  • Increased Demand for Hospital Beds: The pandemic highlighted the shortage of hospital beds, prompting a heightened emphasis on constructing new hospitals and expanding existing ones.
  • Surge in Demand for Tier-2 and Tier-3 Cities: With individuals relocating to their hometowns, the necessity for high-quality healthcare facilities in tier-2 and tier-3 cities became more pronounced.
  • Emergence of Telemedicine: The pandemic accelerated the adoption of telemedicine, influencing the design of healthcare facilities to accommodate virtual consultations and remote monitoring.
  • Focus on Hygiene and Safety: Healthcare real estate developers began prioritizing features such as enhanced ventilation systems, isolation wards, and dedicated COVID-19 care facilities.

Emerging Medical Hubs: Extending Beyond Tier-1 Cities

While tier-1 cities continue to serve as significant healthcare centers, tier-2 and tier-3 cities are garnering increased investment interest. As the healthcare sector broadens its reach, cities such as Pune, Jaipur, Lucknow, and Ahmedabad are experiencing the establishment of:

This transition towards tier-2 and tier-3 cities is propelled by:

  • Government Initiatives: Programs such as the Pradhan Mantri Jan Arogya Yojana (PMJAY) are enhancing healthcare accessibility, resulting in increased demand within these areas.
  • Improved Infrastructure: Investments in infrastructure, such as enhanced connectivity and upgraded transportation networks, are rendering these cities more appealing for healthcare providers.
  • Land Availability: In contrast to tier-1 cities, tier-2 and tier-3 cities offer readily accessible land at competitive prices for development ventures.

Government's Emphasis on Healthcare Real Estate

The Indian government acknowledges the significance of healthcare real estate in the nation's progress. Key initiatives include:

  • Public-Private Partnerships (PPPs): Promoting partnerships between the public and private sectors to establish top-notch healthcare infrastructure.
  • Regulatory Relaxation: Simplifying licensing and approval procedures to expedite the development of healthcare facilities.
  • Advancement of Medical Tourism Infrastructure: Enhancing existing infrastructure and constructing new facilities to attract medical tourists, thereby bolstering the economy.

Insurance: Shedding Light on the Escalating Awareness

The escalating healthcare costs in India have spurred a notable surge in individuals opting for health insurance. This trend underscores the growing acknowledgment that access to quality healthcare is indispensable rather than a luxury. While the rising insurance premiums raise concerns, they also signify the mounting importance placed on comprehensive healthcare coverage.

Government initiatives such as the Pradhan Mantri Jan Arogya Yojana (PMJAY) have been instrumental in enhancing health insurance coverage for millions of low-income individuals, consequently stimulating demand for affordable healthcare facilities.

Comparison: India, China, and the US

It's crucial to recognize that India still lags behind developed countries in healthcare infrastructure. While the national average bed-to-population ratio in India stands at around 1.3 per 1,000 people, China boasts 4.3 beds, and the US has 2.9 beds per 1,000 people. This underscores the necessity for ongoing investment in healthcare and the development of healthcare real estate to narrow this disparity and guarantee sufficient access to quality and specialized healthcare for all citizens.

Corporate Insurance: A Sign of Heightened Awareness

The rising popularity of corporate health insurance plans signals a growing awareness among individuals and employers regarding the significance of quality healthcare and the emphasis on family welfare. This trend indicates a move towards prioritizing employee well-being and recognizing the long-term advantages linked with maintaining a healthy workforce.

Conclusion: A Bright Future for Healthcare Real Estate

The Indian healthcare real estate market is on the brink of significant expansion, propelled by escalating healthcare demands, heightened investments, and the emergence of medical hubs beyond tier-1 cities. With a robust upward trend in rental rate growth, averaging an annual increase of 5-7% across major cities, as reported by CBRE, investing in healthcare real estate emerges as a favorable choice for investors.

The government's steadfast focus on nurturing this growth further underscores the sector's potential to contribute to the nation's overall economic advancement. As the landscape of healthcare properties continues to evolve, one can anticipate further advancements in healthcare investment strategies, integration of technology, and implementation of sustainability practices, thereby shaping the future of healthcare delivery in India. This positions the healthcare property market as a secure and dependable investment avenue for investors seeking to diversify their portfolios.