[ecis2016.org] With students enrolling for higher education in the country growing at a rate of nine per cent annually, we examine the potential of the student housing segment and whether it can emerge as a viable real estate asset class
Mobility of students in India is increasing and it is common to see students moving to different cities, for higher education. However, there remains a dearth of good hostels and other amenities, to accommodate this floating population. Consequently, student housing, as a real estate asset class, is slowly gaining importance. “The paying guest (PG) market in India is unorganised, with barely any uniform standard in place. Students are searching for places to stay, without wanting to get into the hassle of renting a flat or an apartment. Hence, there is a high demand for co-living spaces and student housing, unlike before,” says Nikhil Sikri, co-founder and CEO of Zolo.
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While student housing co-living spaces are already big segments in the real estate markets in the US and Europe, investors are now looking at student housing as the next big trend in India.
“Some of the student-centric cities like Bengaluru, Pune and Chennai, cannot accommodate the rising student population. Moreover, students do not want to worry about food or housekeeping. They care about being economical and being a part of a friendly community. This makes co-living spaces or student accommodation the perfect choice, as it provides well-facilitated, serviced spaces, catering only to students and young professionals,” adds Sikri.
The student housing market in India
Amit Wadhwani, co-founder of Sai Estate Consultants Chembur Pvt Ltd, points out that in cities like Mumbai, Pune and Delhi, students prefer to share flats with two to four people. “While Mumbai, Pune and Delhi have world-class education options for students, these cities are also among the most expensive, in terms of cost of living and real estate,” Wadhwani explains, adding that the “End-users in the student housing segment change in a span of three to five years, with most of them either moving back to their home towns or another city altogether.”
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According to Santhosh Kumar, vice-chairman of ANAROCK Property Consultants, “Out of the total 36.6 million students enrolled in the higher education space in the country currently (growing at a CAGR of over nine per cent), more than 75 per cent live outside their homes. The existing hostel facilities can accommodate only 18-20 per cent of the total migrant student population. Hence, there is a huge untapped potential for student accommodation in the country. Student housing catalyses a massive demand of more than 10 million beds, across the major cities of the country. As the sector grows, opportunities will arise for various models of the student housing business, such as university tie-ups, independent housing, managed services, etc. Tech-enabled players will eventually eliminate brokers. Moreover, the inconveniences involved in finding accommodation will reduce, with online services gaining prominence.”
Properties near colleges in demand
In cities like Pune, Bengaluru, Mumbai, etc., to cash-in on the significant demand from students, several developers are offering affordable housing options, near the campuses. This is a motivating factor for investors to buy flats and rent it out to the students. People are also designing their properties as co-living student accommodations, in accordance with the facilities that students need – security, space, and a conducive study environment. These spaces are fully-functional and close to universities. “The real estate market is leaning tremendously toward student housing. Specially designed co-living spaces for students, are new in the Indian market and with a continuously rising population of students enrolling for higher education, people are diving into this newfound real estate opportunity,” says Sikri.
Student housing: Return on investments
Investors can design and rent out available spaces for students, with minimal input and earn decent returns.
“For students, the definition for a good place to stay, depends on factors like proximity to their colleges, commuting options, safety, availability of food outlets and so on. The starting range for a single occupancy can begin anywhere from Rs 7,000 per month and can go up to Rs 20,000 for different localities in Noida and Gurugram. In Bengaluru, it ranges from Rs 10,000 to Rs 35,000 in localities like Hebbal, Koramangala or Nagarbhavi. In Mumbai, it can start from Rs 10,000 in places like Goregaon, Parel or Andheri west,” Wadhwani elaborates.
Hotspots for student housing in India
Student housing is likely to be concentrated in tier-II cities and a few metro cities. It is unlikely to gain prominence in the metro cities, given the high prices of land, says Rajeev Bairathi, executive director and head – capital markets, Knight Frank India.
“Student housing will be a localised phenomenon, in the areas and macro-market where universities are located. It is an emerging asset class in the real estate industry that will remain small, for the next four to five years. At this juncture, about 65-70 per cent of the student housing segment is catered to by unorganised players and only a miniscule five to 10 per cent by organised players. Gradually, the unorganised players will give way to organised third-party players. Globally, the trend is that the universities focus on academics and allow third-party service providers to manage student housing. A similar trend will soon pick up in India in the next few years,” concludes Bairathi.
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