Healthcare real estate deficit: India requires additional 2 billion square feet

The country is currently grappling with a shortage of 2 billion square feet in healthcare real estate, according to a recent report by Knight Frank and US partners Berkadia. The shortfall is attributed to the existing bed-to-population ratio of 1.3/1,000, indicating a deficit of 1.7/1,000. To meet the recommended ratio of 3 beds per 1,000 people, an estimated 2.4 million additional beds are urgently needed.

Highlighting the imperative for strategic investments, the report outlines around 582 investment opportunities in medical infrastructure, valued at $32 billion, with the private sector currently holding a 63 per cent share amongst the country's 70,000 hospitals.

Global surge in healthcare investments

India's healthcare market, which reached an estimated $372 billion in 2022, has witnessed growth at an average annual rate of 18 per cent. The COVID-19 pandemic has further accentuated the demand for enhanced infrastructure and service delivery, positioning healthcare as an appealing sector for potential investors. Global investments in healthcare-related real estate have reached $38 billion, constituting approximately 4.3 per cent of total global real estate investments.

Policy shift for health

Aligned with Sustainable Development Goals, India targets universal healthcare coverage by introducing various schemes related to insurance and access to affordable healthcare services. The National Healthcare Policy (2017) aims to elevate government spending on healthcare to 2.5 per cent of the GDP, with the Central Government's budgetary allocation rising from 1.2 per cent in FY 2014 to 2.1 per cent in FY 2023.

Key drivers of India's healthcare industry, as identified in the report, include its status as one of the fastest-growing economies, high personal spending potential, a rising ageing population, increasing per capita incomes, growing health awareness, and the penetration of health insurance. Lifestyle diseases, particularly cardiovascular diseases, contribute to the demand for specialised healthcare.

India's emergence as a destination for healthcare tourism is evident, offering quality medical procedures at comparatively lower costs. Despite the existing healthcare infrastructure deficit, India ranked 10th out of 46 destinations globally for medical tourism according to the Medical Tourism Index (2020-21).

Shishir Baijal, Chairperson and MD, Knight Frank India, emphasised the urgency of addressing the population-to-bed ratio challenge. He highlighted the post-pandemic era as a time when healthcare became a mainstream avenue for investors seeking long-income-generating assets. Baijal also mentioned an emerging opportunity for investments in medical research and development to address potential future pandemics.

“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,” said Julian Evans, Partner and Head of Healthcare at Knight Frank.

As the global healthcare sector continues to grow, investors are likely to explore opportunities in India's healthcare industry, driven by the sector's potential for long-term income generation and its alignment with environmental, Social, and Governance (ESG) considerations.