Student housing: An unorganised segment with potential for lucrative returns

[] With healthy demand and the advent of tech-enabled solutions, the student housing sector has given opportunities to investors seeking to earn rentals. We look at the future of this segment in India

There was a time, when a student housing option meant shabby rooms, overbearing landlords and limited food options. Now, it has emerged as an important real estate segment, with investors seeking to earn rentals from their property investment.

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Growth potential in India’s student housing segment

As per market research, there are almost 34 million students in higher education in India, out of which 74% of the students are concentrated in the top 10 states. On the other hand, the unmet demand for student housing is up to 60%, across the top states. Up till now, most of the demand was fulfilled by paying guest accommodations or university housing, which used to be very limited, due to operational issues. Now, platforms like Oyo, Placio and Stanza Living have come up and are hoping to tap into this unmet demand. Oyo Life is targeting over one lakh beds in the top 10 Indian metro cities by the end of 2019, while Stanza Living has forayed into student housing in Bengaluru with the launch of 5,000 beds across 27 residences.

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According to Anindya Dutta, co-founder of Stanza Living, “Student housing continues to be a largely unorganised real estate segment and needs professionally-managed, tech-enabled interventions designed around a student’s unique lifestyle.” Dutta explains that his company’s strategy, is to use consumer-friendly technology interventions that enable prospective partners, such as landlords, developers and real-estate professionals, to connect easily with them. “We are targeting an inventory of one lakh beds across the country, by 2021,” he says.

Explaining his company’s business model, Rohit Pateria, co-founder and CEO of Placio, says that they collaborate with universities and private developers on an operational basis. “We manage the accommodations inside the campus and look after the management and user experience. We also operate by renting buildings on three-year leases, in which they offer different categories of accommodation,” Pateria elaborates.

[] Student housing: Indian real estate’s next big segment in 2019?

Co-living spaces

India is also a leader in the region, vis-à-vis co-living spaces. The undersupply of student accommodation, coupled with the market size, are a huge draw for developers and start-ups. Institutional investors and venture capital firms have found their way to India, with the likes of Goldman Sachs and Warburg Pincus investing in the sector. “Co-living bridges a housing gap that traditional living categories do not support,” says Vijay Rajagopalan, head – alternatives, JLL India. “As co-living spaces are fully furnished, with cleaning and maintenance services, tenants only need to deal with one operator instead of paying for deposits, utilities, furniture and agents’ fees.” Also, from a tenant’s perspective, staying in a co-living space could be more liberating and convenient for students, because of the amenities and facilities offered, which are not available in student-dedicated housing units. This includes quality of the housing and the amenities and the flexibility to leave.

Student housing: Rentals and returns on investment

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“Investors can earn up to 10% annual rental yield by investing in student housing projects, while regular residential projects offer up to 2%-4%. Private developers too are joining the bandwagon, by developing projects essentially for student leasing. These can be bought by individual investors and can be licensed under any student housing brand,” adds Pateria.

Returns will also vary, depending on the location. For example, industry experts point out that tier-3 and tier-4 cities such as Mesra, Kota and Pilani, which have premier institutes, can offer much higher returns to the investor. In general, areas around universities and colleges are always in demand, as most of the students still prefer to stay in the university campus. However, in later semesters, students usually seek apartments which too can be maintained as an off-campus facility, especially in the metro cities.

Student housing: Factors that can make a property attractive to prospective tenants

If you are already operating a paying-guest accommodation, the amenities that you provide can be a key differentiator. While start-up brands are working on user-experience, the rents in PG accommodations are still nominal and affordable for students. Here’s what landlords can do, for better tenant satisfaction:

  1. Better amenities, such as home-cooked food, Wi-Fi, etc.
  2. Better lounging facilities with big and spacious rooms and recreational areas.
  3. Regular cleaning and proper management systems, for day-to-day work.
  4. Improving safety and security.

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Category: Lifestyle

Debora Berti

Università degli Studi di Firenze, IT

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