Student Housing: The next big trend in the Indian real estate?

October 18, 2019 1:23 PM

Student housing offers immense potential for growth and hence, leading real estate developers view it as one of the emerging and safest avenues for investment.

real estate, real estate investment in India, student housing, Bengaluru, Dehradun, Jaipur, Pune, Jaipur, Noida, GurugramThe demand for student housing is inelastic in nature and is unlikely to witness major changes irrespective of the state of the economy.

A major chunk of India’s population is in the age group of 15 to 24 years. According to a Knight Frank report, around 34 million of them are students, who are currently enrolled in courses at universities across the country. And the number is ever rising. Traditionally, students tend to prefer rented accommodations like hostels, paying guests and shared apartments. Of late, student living has emerged as one of the preferred options as they come with better services and facilities.

Purposely designed, it is aimed at meeting the requirements of the student community offering various amenities, including dedicated study areas, dining facilities, internet connection, sports and entertainment, comfortable lodging and security. In terms of security deposits, the amount is generally low. The terms and conditions of the lease agreements are also comparatively flexible given the fact that students in higher learning comprise a floating population. The rules and regulations pertaining to housing that are imposed upon the leaseholders — that is, young men and women — are also flexible.

Student housing offers immense potential for growth and hence, leading real estate developers view student housing as one of the emerging and safest avenues for investment. The demand for student housing is inelastic in nature and is unlikely to witness major changes irrespective of the state of the economy. Currently, India has the third largest higher education system in the world with around 38,000 colleges and 800 universities. The sheer number of students enrolled in higher learning is also one of the highest in the world.

As per a study, institutional accommodation – hostels, boarding houses and on-campus housing facilities – is available to less than 20 per cent students enrolled in these educational institutes. It implies that only one in five students enrolled in a higher education programme is fortunate to get a bed for lodging in institutional set up, thus, leaving a majority of students at the mercy of rent seeking landlords.

The number of students in higher educational institutes in the country is only expected to rise further in the next few years. In the last few years, India has also attracted a lot of foreign students to its fold, courtesy the Central government’s unique initiative of ‘Study in India’, which is basically an invitation to students across the globe to enrol and study in higher educational institutes in India. The initiative launched in April 2018 is led by EdCIL (Educational Consultants of India), a central public sector enterprise.

Students consider a host of factors like connectivity to the place of learning, power back-up, quality of food and furniture, and so on before deciding upon an accommodation. Smart property owners have been providing facilities, including in-house mess, high-speed internet connectivity, entertainment facilities like television and indoor games, 24X7 supply of treated drinking water and electricity including power back-ups in order to attract students.

Students usually live in shared accommodation, which allows them to cut down on rentals. The concept of co-living is also catching up in most metro cities and Tier 1 cities of the country, which again allows them to lower their cost. In addition, institutes of higher learning are also proliferated in Tier 2 cities of the country as well places like Bengaluru, Dehradun, Jaipur, Pune, Jaipur, Indore, Jalandhar, Chandigarh and Vadodara apart from the numerous private institutes in the national capital region of Delhi, including Noida and Gurugram. The demand for student housing has concurrently increased in these cities as well.

Another study published recently says real estate developers are likely to add nearly six lakh beds for students within the next four years. During the same time period, the sector is set to witness an investment of around USD 700 million.

For real estate investors, student housing offers good returns on investments. This is due to the fact that student housing accommodations are usually located in prime areas, nearby colleges, universities and private institutions. These areas are generally well connected to other areas of the city, thereby resulting in a rise of property prices exponentially every few years.

Some of the developers are also adopting the ‘lease/renew’ model in the sector of student housing by entering into partnerships with institutional developers. Developers are partnering with institutions to provide housing facilities to students enrolled in higher education on lease/renew model provides. This model assures the developer of assured sale of units in the project or of assured generation of lease/rental income. Prominent names in the real estate industry have already formed joint ventures to address the shortfall in student housing.

(By Parveen Aggarwal, Founder & Chairman, Signature Sattva)

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