"It was horrible, 35% exit fee, no capital growth on your...

"It was horrible, 35% exit fee, no capital growth on your investment + $5,000 pa management fees + the ability for them to kick you out if your deemed too senile. etc."

I have the application form for an ILU my mother was looking at , you are correct , the conditions are similar to what you describe above , but she is still considering buying an ILU as the positives for her of lock and forget security , commune swimming pool ,no maintenance , inhouse entertainment and group taxi services possibly out weight the negatives .
Also your point of a lack of capital growth may be irrelevant now that house prices are stabilising which may result in higher demand not less for RIET type ILUs,