India needs 2B Sq. Ft. healthcare real estate: Knight Frank

Global investments in healthcare real estate have reached $38 billion

In their latest report, global real estate consultancy Knight Frank and their U.S. partners Berkadia, note that India is currently facing a deficit of 2 billion square feet of healthcare space to cater to its current population base of 1.42 billion people. The estimated need for additional beds to reach the recommended ratio of 3 beds per 1000 people stands at 2.4 million beds. India has a considerable gap between the number of hospital beds available in the country and the number of hospital beds required. India’s existing bed to population ratio is 1.3/1000 population (both private and public hospitals included), and there is a deficit of 1.7/1000 population. To cater to the existing population, there is an additional requirement of 2.4 mn beds.

This disparity provides an opportunity for public and private players, to expand their footprint in the healthcare industry in India. As per Indian government estimates, there are about 582 investment opportunities in medical infrastructure including hospitals valued at US$ 32bn. The hospital industry accounts for 80 per cent of the healthcare market in India. Currently, India has an estimated 70,000 hospitals of which the private sector constitutes 63 per cent of the total share.

Source: WHO, Niti Aayog, Knight Frank Research

India’s healthcare market was estimated to be at US$ 372 bn in 2022, a significant growth from US$ 73 bn a decade ago, in 2012. At this level and pace, India’s health care industry has grown at an annual average rate of 18 per cent and got accelerated with pandemic as it challenged the healthcare sector by stretching the need for infrastructure and service delivery, therefore making it a trigger for transformation. Global investments in healthcare related real estate has reached US$38 bn, accounting to 4.3 per cent of total global real estate investments.

Expansion of India’s healthcare market

Source: IBEF, Knight Frank Research

As part of the Sustainable Development Goals, India is committed to achieving Universal Healthcare Coverage. To achieve its goals, the policy makers in India have introduced schemes over the years pertaining to insurance as well as access to affordable healthcare services. India’s National Healthcare Policy (2017) aims to achieve government spending on healthcare upto 2.5 per cent of the GDP. The Central Government’s budgetary allocation to healthcare so far has increased from 1.2 per cent of the GDP in FY 2014 to 2.1 per cent of the GDP in FY 2023.

Demand drivers of India’s healthcare industry

As per Knight Frank’s analysis, India is one of the fastest growing economies with high personal spending potential of individuals of which healthcare comprises as major share. Factors such as the gradual rise in an ageing population, increasing per capita incomes, growing health awareness and the penetration of health insurance drive the demand for the healthcare industry in India. Additionally, there has been a growing incidence of lifestyle diseases in India led by cardiovascular diseases, which will heighten the demand for specialised healthcare.

India: Popular destination for healthcare tourism

India is emerging as one of the most affordable healthcare destinations in the world providing quality medical procedures at a relatively cheap cost. In the pre-pandemic years between 2014-2019, the inflow of foreign tourist arrivals on medical visa grew at a CAGR of 30 per cent. It is noteworthy that despite the deficit in healthcare infrastructure in India, the country is an attractive market for healthcare tourism. As per Medical Tourism Index (2020-21), India ranked 10^th out of 46 destinations in the world. With an aim to improve medical tourism, India’s tourism ministry formulated a national strategy and roadmap for medical and wellness tourism in 2022 under the ‘Heal in India’ initiative with the primary objective to strengthen the healthcare ecosystem in the country.

Shishir Baijal, Chairman and Managing Director, Knight Frank India said “The challenge of India’s population to bed ratio, coupled with increasing population, underscores the pressing need for significant enhancement in the country’s healthcare infrastructure. Addressing this demand necessitates nearly doubling the current real estate capacity to adequately meet the expanding healthcare requirements of the population. Post the pandemic, healthcare ranks amongst the mainstream avenues for investors looking for investments into long income generating assets. According to our Attitudes Survey, almost one-fourth of the Indian ultra-high net worth individuals had cited to invest in healthcare related assets in 2023. There is also an emerging opportunity for investments in medical research and development, to accentuate discovery of new drugs to navigate any future break out of pandemic inflicted diseases.”

Cross country cost comparison of medical procedures

Source: GoI, Knight Frank Research

The global healthcare sector remains buoyant and is expected to grow despite a challenging economic outlook. This comes as the global population shifts rapidly towards an ageing demographic, which is anticipated to drive demand for elderly care beds, particularly for full-time nursing care delivered in specialised facilities. Investors have seized upon is trend, with North American capital contributing almost 68 per cent of the funds deployed in the past year, while France and Belgium attracted the highest levels of cross-border investments. Recognizing the potential of APAC’s ageing demographic, the private sector is actively exploring opportunities in response. Acquisitions of operating assets in the APAC care sectors reached a record high of US$2.8 billion in 2022.

Julian Evans, Partner and Head of Healthcare, Knight Frank said, “Broad in its coverage, the case for investment in the healthcare sector remains consistent not only across its various subsectors but also across geographic borders. Supported by an ageing population across the globe and shifting demographic trends, the healthcare sector is seeing increased demand for long-term care facilities. Furthermore, as private equity, REITS and institutional investors continue to chase the strong, long income generated, there is growing interest in healthcare’s capabilities to aid ESG investing strategies.”