Investing in serviced apartments has become an appealing option for those seeking an alternative to traditional property investments. These fully furnished units offer hotel-like amenities and flexible lease terms—making them fit for business travellers and guests alike. But as with any investment, there are pluses and minuses. In this article, we’ll walk you through the pros cons serviced stay equation, offering a balanced view, real-world examples, and guidance for anyone considering a serviced apartment investment.
What Are Serviced Apartments?
Serviced apartments—also known as aparthotels—are furnished units available for short to mid-term stays. They offer the comforts of home like kitchens, living spaces, and Wi-Fi, with the convenience of hotel-like services such as housekeeping and concierge .
These are common in major Indian cities like Mumbai, Delhi, Bengaluru, and Hyderabad, catering mainly to business travellers, relocating professionals, and long-stay tourists .
Pros of Serviced Apartment Investment
1. Higher Rental Yields
Serviced apartments often command better yields than traditional rentals because they’re rented daily or weekly. During high-demand seasons, returns can be significantly higher.
2. Low Involvement
With property management and maintenance handled by operators, investors enjoy a “hands-free” experience—no chasing tenants or scheduling clean-ups.
3. Flexible Usage
Some models allow owners limited personal stays each year in their own units—ideal for part-owners or business travellers.
4. Amenities Appeal
Operators bundle housekeeping, laundry, utilities, Wi-Fi, and often include gym or concierge services—offering guests a hassle-free, premium stay.
5. Diversification
They sit between residential and commercial property markets, offering a unique investment mix with less tenant turnover and professional-grade amenities.
Cons of Serviced Apartment Investment
1. Capped Capital Appreciation
These are typically marketed to investors rather than end-users. As a result, appreciation may lag behind conventional residential property.
2. Narrow Resale Market
Serviced apartments attract a niche buyer base, sometimes limiting resale opportunities and selling times.
3. Financing Challenges
Banks see them as higher-risk investments. While residential loans may offer 80% financing, serviced units often demand 70% or less, requiring larger deposits.
4. Operator Risk
Your earnings depend heavily on the operator’s reputation and performance. Mismanagement can lead to vacancies, unpaid rentals, or extra charges .
5. High Running Costs
Maintenance, utilities, and corporate-level cleaning services—sometimes including gym or pool upkeep—can eat into your profits.
Real-Life Example
Consider a serviced apartment in Mumbai rented out under a lease guarantee of ₹80,000 monthly. After operator fees, utilities, and maintenance, net income may only be ₹50,000–₹55,000. Compare this to a regular 1BHK with ₹40,000 rent and minimal upkeep—profits may end up similar, but the serviced version demands higher initial investment and entails more complex management.
Pros Cons Serviced Stay—Quick Comparison
| Feature | Pros | Cons |
| Rental Yield | Higher off-season income; weekly rates boost revenue | Seasonal dips can hurt occupancy and return |
| Management Responsibility | Handled by operator—less owner involvement | Poor management causes revenue drop; you lose control over operations |
| Ownership Flexibility | Occasional stays allowed (subject to agreement) | Usage restrictions often apply; can’t live full-time |
| Capital Appreciation | Consistent rental income may outpace capital gains | Property values may grow slower than traditional housing market |
| Financing Ease | Loan available with greater equity | Smaller loan-to-value ratio; higher upfront capital required |
| Resale Liquidity | Targeted investor market, possible same-operator handover | Limited buyer pool, slower sale process |
Tips Before Investing in Serviced Apartments
- Check Operator Track Record: Research past performance, occupancy rates, and reputation.
- Loan Pre-Approval: Confirm LTV and interest terms with multiple banks.
- Read the Management Agreement: Check exit clauses, fee structures, and your staying rights.
- Location is Key: Business districts, airports, and tourist hubs drive better occupancy.
- Understand Regulations: Know GST liabilities and local zoning rules—especially in tourist-heavy states.
- Account for Costs: Ask for itemised expense breakdown—service fees, utilities, taxes—to estimate returns accurately.
- Tax Implications: Income may be taxed under business income slabs; consult a CA for advice.
Vendor Mentions and Where To Start
- Oakwood Premier (Mumbai): Premium aparthotels with global standards.
- Aparna Constructions (Hyderabad): Integrated serviced-apartment projects with lease-back options.
- Corporate Stays (Delhi NCR): Manages mid-tier serviced units for professionals.
- OYO Living (Pan-India): Offers flexible furnished apartments—though quality varies between properties.
Is It Right for You?
If you’re seeking steady rental returns and low involvement, and can shoulder a higher upfront cost, serviced apartments may suit you.
But if your aim is long-term capital gains, or you want the flexibility to occupy anytime, a standard home might serve you better.
Final Word
A serviced apartment investment comes with definite advantages: convenience, yields, and hands-off management. But be mindful of the downsides—financing hurdles, limited resale options, and dependency on operators. Do thorough due diligence, talk to multiple operators and financiers, and weigh both pros cons serviced stay to see if this niche investment aligns with your portfolio goals.
Source : fulinspace.com
