Covid-19 outbreak has led to a major global healthcare crisis. The pandemic has exposed the vulnerability of healthcare systems even in developed countries, not to mention that situation in India is grim even from a real estate perspective. While some of the advanced countries such as Japan and South Korea have 12-13 beds per 1000 population, the same ratio for India is merely 0.5 bed per 1000 population, even behind countries like Chile and Colombia.

At the time of independence, the private health sector provided only 5-10% of total patient care in India. Today private sector consists of 58% of the hospitals in the country. Medical Brands like Apollo, Narayan, HCG, Max Healthcare, etc. have set up hospitals even in Tier II cities like Lucknow, Jaipur, Mohali, Surat, Nashik, Indore, Vishakhapatnam, Tiruchirappalli, Guwahati, etc. The data suggests that in last three years about 4282 beds have been added to the tier II cities which is nearly twice to that of Metros which added only 2288 no of beds.

Among the Tier-1 cities l Bangalore occupies the top position with 34 hospitals operated by branded chains. Mumbai way below with only 11 hospitals with branded operators even behind Delhi and Chennai who are at 26 and 19 hospitals operated by brands. Metro Cities attract patients from all parts of the country particularly for the super speciality infrastructure, eminent medical experts and their reputation in handling medical complexities. However, the capacity the hospitals are less than the WHO recommended ratio of 3 per 1000 beds. Within this category Mumbai has capacity of less than 2 per 1000 beds, lowest among peer cities.

The Capex for developing a private hospital facility can be divided into three major heads of land/FSI cost, building structure and equipment. It is understood that the expenses of later two components are more or less similar in all Metro Cities. Therefore, land/FSI cost plays a vital role in overall cost of development. For example, the effective cost of FSI to develop a 150,000 sqft of hospital in central Mumbai will be around Rs 12,900/ sqft , while the same in Koramangala Bangalore would be 40% lower at Rs 5200/ sqft. The same FSI cost would be Rs 4000/ sqft and Rs 3300/ sqft at around HITEC city Hyderabad and EM Bypass at Kolkata respectively. The effective cost has been derived by considering various incentive FSI available in the respective cities and associated costs for premiums and charges over and above the cost of the land.

The analysis shows that while the real estate cost is nearly four times in Mumbai when compared to Kolkata the cost of healthcare services does not differ to that extent. In other words, it is not feasible for most of the healthcare operators to function in Mumbai in sustainable manner. This is also true for some other markets where the cost of real estate highly restrictive owning several premiums TDR and development charges linked to higher “Ready Reckoner” or government rates.

Today, Healthcare is at the crossroad where there is an all-time high demand of quality and affordable healthcare facility while the high real estate cost prohibits the prospects of private sector to step in. Thus, there is a need to think beyond the FSI policy and to explore various innovative PPP models. Also, there is a need to look at surplus lands held by various central and state government agencies. Even a fraction of the same is brought into the market at a reasonable price or in a Partnership model it might change the paradigm

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