June 23, 2009
Deeded Ownership – A purchaser acquires ownership interest in an immovable property. Time-share ownership, undivided interests, co-operatives and fractional interests are some of the forms of deeded ownership in common use.
Right to use Products – These allow users to avail accommodation during a specified week, season or time interval for a specified number of years. Club memberships and holiday licences are some of the formats that are available.
Other variations that are available include fixed period, floating period, rotating week and split weeks. In addition, the point format is a recent addition. Majority of vacation ownership resorts offer apartments with full or partial kitchenettes and limited services. They have strong self-help features and most add-ons such as linen change and house-keeping are additional paid-for services.
Timeshare Industry in India: As per All India Resort Development Association (AIRDA), there are over 45 timeshare companies, 80 resorts, 250,000 timeshare memberships, 5,000 units, total investments of US $250mn and growing at +15% CAGR since 1998. The vacation ownership industry provides dedicated products and services to leverage the vast, unexplored domestic tourism potential. Growth in 2008 was 25% as against the last five-year average of 18% according to Group Resort Condominiums International (RCI).
Exhibit 5: Typical profile of Timeshare Consumers in India
Average age Average household size Typical children count Membership gender Source: Angel Research, Industry
42 years 4 people Between 1 and 2 89.8% male
The memberships are long-term in nature usually for 15 or 25 years and members pay annual fees towards maintenance charges for upkeep of property, utilities or staff salaries. Pertinently, though the vacation ownership industry is well established in the West, it has taken time to catch on in India. Economic growth and rising affluence, however, has helped of late.
Annual Subscription Fee (Rs)
Exhibit 6: Scheme Illustration (Rs) Membership Fees (Rs) 1,98,000
Source: Angel Research, Industry
A 25-year lifetime membership with Club Mahindra for a studio apartment taken in the ‘Blue' (non-peak) season costs around Rs1.98lakh (Rs198,000). Add to this the company's annual fee (Rs8,043 at current rates) and a member would be paying around Rs15,963 as the weekly rent for stay at a five-star-grade hotel, or Rs2,280 per day for two adults and two children. This is about one-fifth of regular five-star rates. Mahindra and other resort developers are also offering interest-free EMI facilities for up to one year to appeal to the upper middle-class buyer. Maintenance fees may increase 3-5% each year. The maximum limit is fixed by the developer. MHRIL, for example, has indexed itself to the Urban Non-manual Consumer Price Index (CPI) as published by the Reserve Bank of India.
The exchange fees are fixed at Rs12,000 for long-haul international holiday exchanges (like Europe or the US) and Rs8,500 for short-haul exchanges (within Asia). Members can exchange a peak season two-bedroom apartment in a good location in India for a studio apartment somewhere abroad also. Domestic exchanges (exchanging a week at your resort for a week at another affiliated resort) costs Rs5,500.