The beginning of Year 2000 saw retirement communities for middle and upper middle-income group in Indian society talking root. Retirement communities were accepted as against the old age homes that were meant for the poor and destitute. Senior citizens, many of whose children went far away from their homes looking for greener pastures, felt the need. As time went by, the seniors aged and when they needed care, the retirement communities provided the same.
Real Estate developers in India developed retirement communities. Since one did not require any license or knowledge to create and run retirement communities, the developers cashed in on this niche market, even though the facilities offered were very basic – house, food and basic services including medical. Not many have ventured into the “care” component of senior living, which is Assisted, Memory or Palliative care. In spite of this, this segment has grown significantly in the past decade, mainly because of the demand from elders and their children who accepted the concept of active life with community living for their parents, availability of good security and, ambulance for emergency hospital evacuation. Coimbatore, with over 22 projects, has become the Retirement Capital of India! Southern India has more number of retirement communities than the north, west or east of India.
But is this segment in for slow death in the coming days, thanks to GST& RERA?
Let us examine:
Effect of RERA on Retirement Communities:
- Retirement communities are not extension of real estate, but it is assumed to be so by the Government. There are no separate building codes, rules and regulations for setting up and running retirement communities. Whatever rules are there, cater to the old age homes run by NGOs and not for retirement communities run by companies that cater to the huge Middle class segments
- Retirement communities have large Common Amenities component. This is because they need a building with Lounge, huge dining rooms, medical centre, Activity Centre, Therapeutic Pools, Activity Centre, Library, TV Room, essential staff quarters, Care components – assisted, memory and palliative
- Some of the retirement communities also cater to the needs of Special children (Autism, Down’s syndrome, Cerebral Palsy and Spastics, and these Persons with Disabilities (PWD) are looked after by the Management through a unique residential model after the demise of their parents until the demise of the PWD. In fact this is a Make in India concept, which is not available any where in the world. The residential model requires creation of hostels where the PWD are moved after the demise of their parents and looked after by Care Givers, the Management, surviving senior citizens who are parents of PWD. Senior citizens with such Special children need to pay more for themselves and the care of the PWD and, save additional money for the lifetime of PWD
- In normal real estate, the common amenities are handed over to the Association or Society formed who run the day-to-day affairs of the residents while the developer exits. The Executive Committee of the Society maintains the accounts, ensures basic services and manages the building or the project. Since the concept of life is different for the elders, they are given the right to use the common amenities, which are owned by the Service Provider and the residents pay a deposit, which is paid back to them on vacation – either for personal reasons or due to death. There are water-tight agreements signed by the Management and the residents including standard of services and care to be provided with safety and default clauses in favour of the residents
- Please note that the Real Estate Developer/Management spends lot of money for creation of these facilities, look after the same and provides quality care and services as desired by the elders
- In a retirement community with senior citizens, such an Association or Executive Committee as prevalent in real estate projects cannot provide the services and care for the senior citizens. Nor are the seniors interested in such activities, as they have come to live in peace and harmony in the twilight of their lives
- Besides, the Services and Care are provided by the Service Providers who take up this segment simply because of their passion to serve the seniors and in so doing, earn their livelihood. There are proper agreements to protect the interests of the seniors and also of the service provider
- For resolution of any dispute, the residents have a clear and time-tested redressal mechanism including a Resident Committee elected by them who interact with the management on any issue and find resolution
- RERA does not address this segment of retirement communities. The registration of projects with the RERA Authorities for projects in pipeline or those under construction will not be possible in the present format. How to overcome the same is the question?
- It may not be possible to change the concept of retirement communities (not old age homes by NGOs) to suit the rules of RERA, which are available for real estate projects today
- A large number of developers and senior citizens would be affected unless the authorities address the concerns of such companies involved with retirement communities and elder care
Effect of GST on Retirement Communities in India:
- Before GST came into effect, senior citizens residing in retirement communities paid 15% as Service Tax for maintenance charges which were for the services provided by the company that created retirement communities. The service tax was towards provision of labour for various services provided like housekeeping, security, catering, gardening, medical staff, manager etc. as well as for maintenance of common amenities, which were utilized by the residents. The rates were as decided by the residents and the service provider mutually
- No Service tax was charged for food
- The above was in vogue since 2004 and has changed with the introduction of GST
- Now, the elders are required to pay 18% as GST (an increase of 3%) for maintenance charges and also 5% or 12 % GST for catering. If the company providing catering has a turnover of below Rs 75 lacs, then 5% GST is applicable, but if it is more than Rs 75 lacs, they are to be charged 12%
- Since retirement communities have not been shown separately as a category, these rates have been taken as specified for others in the Services and Hospitality sector
- These charges would on an average increase the expense of senior citizens by about Rs 600/ per head per month. Thus a senior couple would have to pay additional Rs 1200 per month
- The differential rate for catering, based on the turnover of the company (5 or 12%) is simply not understood as the seniors are being charged more for no fault of theirs
Conclusion:
Senior citizens of the middle-income group segment will be at great disadvantage consequent to the implementation of RERA and effects of GST. As it is senior citizens in India are a worried lot with longevity, which increases the cost of care as one age. The elderly population gets no concession in registration cost and now are saddled with additional expenditure with the implementation of GST
If current rules of RERA are applied for those undertaking retirement community projects across India, none would come forward as the rules are heavily loaded against them. By having the undivided share of common amenities given away to the owners and with the formation of an Association or a Society, the Service providers may be asked to leave if the majority of the owners join hands. This would kill the passion and compassion needed for taking care of senior citizens. While it is necessary that rules are framed for retirement community segment separately, by asking the real estate rules to be followed will be deterrence since the concept of senior living and care is totally different. Seniors come to retirement communities to enjoy services and care.
With a population of over 100 million Senior citizens in India, which is expected to grow to 140 million by 2040, this segment needs more care and understanding from the government and authorities.