Realty players may find big opportunity in student housing sector; here’s how Covid is likely to help

Updated: Jul 21, 2020 1:31 PM

A new player that offers good quality student housing with grade A standards is expected to set the right benchmark and attract good demand from the market. 

student housing, realty sector, real estate sector, The current dip in demand is a temporary blip and does not indicate any long term trend.

Archit Sood

India has been fast warming up to the concept of student housing in the last couple of years with several developers and investors keeping a close eye on the segment. However, the ongoing pandemic has raised some existential questions for this new, up and coming asset class in the near to medium term. With social distancing here to stay, the COVID-19 situation certainly challenges the very idea of student housing which is built on the concept of shared accommodations and optimising the use of spaces thereby saving expenditure. Schools and colleges have remained shut as the entire country copes with the deadly virus that has continued to spread across the nation.

As health and safety take topmost priority for both individuals and businesses, India’s student housing segment is clearly feeling the impact of the pandemic like any other sector. Occupancy levels have significantly declined in the last few months while all expansion plans are currently on hold with most student housing providers on a wait and watch mode. But all is not lost for this segment. In fact, the chances of the segment bouncing back strongly clearly outweigh the downsides of the current situation.

While a successful medical intervention to the crisis will play a big role in the sector’s recovery, let’s not forget India’s growing youth population that comprises students in the age group of 15-24 years. The current dip in demand is a temporary blip and does not indicate any long term trend. Thanks to the COVID-19 situation, student housing will only evolve, come back with positive alterations and be more relevant than ever. 

Physical form of education is here to stay

Virtual classrooms have taken over physical form of education in the aftermath of the pandemic and resultant lockdown. Schools and colleges are currently relying heavily on online classes in response to the present situation where physical movement is strictly restricted. However, we believe that these are short term and temporary solutions adopted in tune with the current circumstances. Despite the popularity and benefits of online classes to many segments of the society, it appears impossible to replace physical education at a certain level of formal education or even higher professional courses.

Physical interactions will remain a necessity for the most part of education in one’s lifetime. And for a vast country like India where quality educational institutions are concentrated in large cities and towns, it is only a matter of time when students, who had left for their hometowns, will be back to their campuses. Institutions and students are already yearning towards going back to the regular model as there are several feasibility issues and technical challenges in continuing with virtual classes on a long term basis. 

Quality services to create distinction 

While the concept of student housing has remained in India for decades largely in the form of paying guest (PGs), there are only a handful of organised players in the market. In that sense, the organised student housing is at the budding stage right now. On the back of the growing inherent demand for such shared student accommodations, several large investment firms and developers have already started the groundwork to enter this space. The COVID-19 situation could lead to some of the providers to relook into the plans with a lot of focus on health and hygiene. 

A clear distinction in the market between an organised player offering quality services and products and unorganised housing providers will be established in the post-COVID-19 world.  Going forward, student housing firms may have to operate like hospitality operators providing higher quality services and experiences to cut themselves from the clutter. During this transition period, the operational cost may increase as these providers try to adopt the new norms of physical distancing and hygiene requirements. But in the long run, these facilities will be key to distinguishing themselves in the market.

Future of student housing segment

For instance, Greater Noida – one of the thriving markets for student housing, a survey by Savills India has found that the city is expected to receive a steady demand for student housing developments. Greater Noida represents a significant market for student housing with more than 50 colleges and approximately 28,000 students enrolling each year for various courses. Approximately 65% of these students are from states other than Delhi NCR and form the potential segment of student housing.

There is an availability of largely three types of housing segments. 55% students prefer housing provided by national and local operators who provide accommodation to the majority of the students. Some of them operate on a structured basis offering amenities. 27% prefer hostels provided by the educational institutes on campus and 18% prefer small-scale paying guest accommodation and apartments rented out in residential colonies.

It was observed that the majority of the unorganised supply lacks quality and amenities. A new player that offers good quality student housing with grade A standards is expected to set the right benchmark and attract good demand from the market. It is expected that going forward off-campus student housing market will pick up demand. Further, the share of organised student housing operators is expected to increase from the previous levels, backed by better facilities and services offered by them.

Archit Sood is MD, Valuation & Advisory, Savills India. Views expressed are the author’s personal. 

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