Hotel-branded vis-a-vis non-hotel branded residences

Historically, the branded residences market has been dominated by hotel brands, which are in a unique position to offer world-class services as well as lend their brand equity for a heightened perception of the development. But residences can and, in fact increasingly are, collaborating with luxury consumer brands from the fashion, automotive and restaurant sectors, as well as celebrity architects/interior designers. This, in turn, is fuelling the trend towards standalone branded residences—in other words, residences without a hotel located within the same building or nearby.

In one of the biggest movements in the Indian sector of branded residences, realty firm Whiteland Corporation signed an agreement with Marriott International to bring 'Westin Residences' to Gurugram in early July this year. The development is slated to be India’s largest branded residential project and the first standalone one sans a hotel onsite from the Westin brand. On the occasion of signing the agreement with Marriott International, Pankaj Pal, Managing Director, Whiteland Corporation, said that the development would “redefine premium home ownership with exceptional service and attention to detail, offering a prestigious address that will bring pride and joy to its residents.”

July, again, saw Samarth Bajaj-founded Boheim, a global Indian luxury living brand, announcing its debut in the luxury real estate sphere in India with high-end villas designed by, for starters, interior designer Gauri Khan, and fashion designers Abu Jani & Sandeep Khosla and Kunal Rawal. Unlike a designer space offered as a premium, albeit readymade, product, these ultra-luxurious bespoke homes will be tailor-made for the owner to the last detail. While the initial roll-out will cover Goa, Hyderabad (Bajaj’s hometown) and Alibaug, international markets like Dubai, Africa, Sri Lanka and Thailand are already on Boheim’s radar. “Why did I enlist fashion designers to curate our interior spaces?” rhetorises Bajaj. “The answer lies in their unparalleled mastery of design and luxury. Freed from the constraints of conventional space design education, fashion designers naturally think beyond traditional boundaries, a quality that enhances their exceptional talent in creating bespoke homes for Boheim patrons.”

Does service enjoy an edge or a ‘designer’ space? Harsh Bansal, co-founder, Unity Group, throws light on what prompted them to approach a consumer luxury brand—Versace, in this case—instead of a hotel brand for the branded residences that are part of their The Amaryllis development in Karol Bagh, New Delhi. “A designer brand like Versace or Armani comes with their independent, full-fledged design team and product offerings. Therefore, they not only support you in interior design but also procuring designer products,” he states, adding, “I'm not quite convinced about the value the service angle (of a hotel-branded residence) brings to the individual home, in a country where house help is readily and cheaply available, and will do things your way.”

On the other hand, Mumbai luxury real estate developer Hubtown is actively looking for a hotel as a brand partner for an “enhanced product differentiation” because “high-end marble will only take you so far,” says managing director Vyomesh Shah. “I can speak only for Mumbai, but service is critical in this market. The level of service even in 100-200 crore apartments is still unorganised. And there is a certain expectation people have of service standardisation.”

However, whether a hotel-branded residence is consumed better than its non-hotel counterpart, “is wholly market dependent,” says Anuj Puri, Chairman, Anarock. “In fact, both types are being offered across cities depending on the demand. For instance, in Mumbai we saw developers collaborate with both consumer luxury brands like Armani and hotel chains. In Chennai and Bengaluru, we have seen builders collaborate with hospitality brands (to create) Taj Sky View Hotel & Residences and Leela Residences, respectively.” 

An architect's perspective

Architect Bobby Mukherrji, who is actively engaged in the luxury residential real estate market as well as several branded residential projects, both in the hotel and luxury brand verticals, enjoys a unique insight into this space from this vantage. “The luxury residential market in India has exploded. Real estate developers have upped the ante in terms of amenities and quality. The benchmarks are incredibly high. Clubs, gyms, salons, valet parking… you name it, a high-end residential complex will have all these and more. This trend is not restricted to metro cities alone. We’re seeing it across India, wherever we’re involved in luxury developments—in Ahmedabad, Surat, Indore, Jaipur, Ludhiana… The Indian home-buyer has never been so aspirational. They have the money, and they have the ambition. In this scenario, the entry of hotels as brand partners has only made the segment more aspirational for the well-travelled, well-heeled Indian consumer. The brand association extends further assurance and commitment vis-a-vis service quality. Customers come to expect a level of professionalism in this regard.”

Mukherji also has an interesting observation to make about the behavioural trait that differentiates the Indian consumer from his western counterpart when it comes to such high-value real estate purchases. “Internationally, a branded residence means everything comes readymade to you: the service, the public spaces and the interiors of your home. But when it comes to India, things are appreciably different when it comes to the last point. The customer will have spent multiple crores on buying a home, and wants things his way when it comes to how it is going to be designed. So the interiors end up being designed by the professional of his choice, obviously at his cost.” 

What determines the success of a branded development for an investor?

Several factors, actually. JLL, in its report The Rise of Branded Residences in Asia Pacific, advises developers/investors to decide whether they would be selling furnished or unfurnished units, and kind of services that would be offered to the buyers. Developers must also take into account the various license costs and fees. These include the residential marketing license fee, which allows developers to use the brand’s name and trademarks in marketing materials. The brand commitment fee ensures ongoing support and brand maintenance throughout the project’s lifecycle. The technical service fee covers design and pre-opening support provided by the brand during the development stage of the property. Additionally, the report points out, there may be homeowners association management fees for maintaining shared spaces and amenities.

The sales price premium advantage

Ampa Palaniappan, Managing Director, AMPA Group, who recently inked a development under management contract with IHCL for Taj Sky View, a hotel and branded residences complex in Chennai, says: “Branded residences like the Taj Sky View are usually valued about 30%-40% higher than a regular residence. Because of their unique service offerings and professional management, real estate valuation of such branded residences experiences higher appreciation over a period of time.” Jaideep Dang, Managing Director, Hotels and Hospitality Group, JLL India, concurs. “On an average, branded residences in the Indian market are priced approximately 30% more than other comparable residential developments in a particular micro market,” he says. Shah prefers to tread on the side of caution. ”We’ve currently not budgeted too much for premium,” he says. “Generally, we allow the market to decide that. But from whatever research we’ve seen, we expect anything from 5 to 15% premium.”

Hotel-branded residences hotspots

Increasing affluence in urban centres across India translates to demand opportunities for this real estate format. “Mixed use developments with co-existence of commercial, retail, residential and luxury hotels is a growing format in the real estate segment in metro cities,” says Suma Venkatesh, Executive Vice President, IHCL. India, according to the Noesis report, is expected to mirror the 12% CAGR of the global branded residence market. Major metro cities, it states, indicate an established appetite for luxury lifestyle. Mumbai, Delhi-NCR and Bengaluru are witnessing a surge in branded residences. However, emerging cities like Surat, Ahmedabad, Jaipur, Chandigarh and Indore show a promise of infrastructure development, FDI and commercial growth. This, says the report, will also satiate the appetite of investors looking to own a branded residence in the area. Pune, Chennai and Goa are attracting interest from developers and investors as well. The evolution of the concept beyond the conventional approach has encouraged developers to explore standalone residences, branded villas and mixed-use developments to cater to diverse buyer preferences. While established metro cities might be suitable for standalone branded residential development, emerging markets would best benefit from the hotel + residences combination whereas in key leisure destinations, a resort + branded villa development would thrive. “The magic is in the mix,” states Dang.

Pole position in the hotel-branded segment

Marriott leads the market. “Not only in the hotel + residences space but also it is amongst the very few companies which has brought its residences-only model to India i.e. without a hotel in the precinct,” discloses Dang. “We are also witnessing other hotel operating companies such as Hilton and IHG, who have successful hotels-cum-residences models overseas, and are exploring prospects in India. Also, other India-born global operators such as IHCL, The Oberoi Group and The Postcard Hotels are exploring opportunities with their luxury hotels being at the heart of such lifestyle-oriented developments.”

The right marriage

While the luxury branded residence vertical is certainly being viewed positively by both developers and brands, hotel operators, not surprisingly, are being extremely careful in their assessment, and all have a strict diligence process of selection. “As a part of our growth strategy, we will evaluate such opportunities with a sharp focus on the project’s design complementing the aesthetics and ethos of the Taj brand including the approach to architecture, landscape, interiors and sustainability,” reveals Ventakesh. Hubtown’s Shah speaks of the alignment of vision and brand on a philosophy level and the ability to complete documentation on a process level, as being pivotal to such partnerships. “What defines luxury? Even within the hotel space it’s different. A JW Marriott is different from a St. Regis. To get aligned on that front is first and foremost critical,” he says. “And then there’s the documentation. We’ve had a couple of instances where everything was aligned, but from a legal standpoint, or process standpoint, or documentation standpoint, we were unable to bridge that (gap).” Whatever the challenges, the advent of branded residences in India celebrates the successful marriage of India’s favourite asset class with best-in-class hospitality—and this has further strengthened investor commitment to this segment. Looks like branded residences are here to stay!