Student housing is a new concept is India, which is gaining popularity among builders as well as property investors. Globally it is the alternate form of accommodation private student housing service providers make available for the higher education students. Let’s have a better understanding of student housing and its business potential for Indian realty market.
With the increasing awareness and the improvement in education level, education industry in India is growing rapidly. The number of students enrolling for higher education and migrating to different cities like Bangalore, Pune, Chennai and Delhi/NCR is increasing every year. As per the data in JLL’s report, around 34 million students enroll for higher education, out of which nearly 26.6 million (76%) students migrate to different cities. As per the estimates, the cities with facilities of higher education can provide accommodation to just 18-20% students of the 76% migrated students.
Chennai, Pune, and Delhi-NCR are the regions, which have seen increased number of educational institutions and student population. This ever growing demand for accommodation by students has given rise to a new concept of ‘Student Housing’ in India. Globally, it is a lucrative and acknowledged part of real estate market. In current realty market in India, student housing is just limited to the accommodation provided to a large number of students in boarding schools, hostels, and universities. But there is a huge gap between the demand and supply of student housing in India as the educational institutions have accommodation provision for limited students only.
Contributing Factors in Growth of Student Housing in India:
Apart from limited accommodation with the universities and colleges, there are few more factors playing a vital role in increasing demand for student housing. Some of these include:
Changing Expectations of Students: Gone are the days when students used to live a highly disciplined life in hostels. They now live in more free society and don’t like life of hostels with a number of restrictions. This is the reason they look for separate homes or apartments, where they can enjoy lifestyle of their choice.
Low Risk Profile: There is minor default risk in student housing due to financial guarantee from parents. This has encouraged builders and investors to venture into this trending high potential business.
Limited Availability of Land at University Campus: Colleges and universities are now going big with academic areas and common spaces, which has left them with limited land for accommodation facility for students. This has given builders an opportunity to launch projects in proximity to the academic areas and provide accommodation to students.
Opportunity for the builders and investors
Luckily, the opportunity has come at a great time. Indian residential real estate market is currently going through a slowdown and builders are looking for options to sell out existing inventories. Now, this is a great opportunity for them to convert their existing under-construction residential projects into student housing projects and target the investors who want to earn rental yields from their investment in housing projects.
Here are a few reasons why student housing makes a great option for developers and real estate investors:
Regular and High-income Growth: Student housing gives builders and investors an opportunity to earn a steady income by renting out residential projects to students. The industry has shown signs of resilient performance even in downturns.
Strong Demand Expectations: Growing enrollments in higher studies will undoubtedly give rise to housing for students. This concept gives builders a chance to clear their unsold inventory.
Inferior Quality Accommodation in Educational Institutes: Accommodation provided in the educational institutions generally doesn’t meet expectations of students. Most of them don’t even have proper basic equipment and amenities. In such a scenario, builders and investors can gain high profits by offering high-quality residential facilities to the migrated students.
Deserted Location of Colleges/Universities: Due to limited availability of land in the central area, most of the new colleges/universities are coming up outside city municipal limits. There are limited numbers of housing projects in these areas. So the builders launching residential projects in outskirts of the city can promote them as student homes.
Further, the favorable demand-supply scenario gives developers and investors a chance to diversify into an income-yielding asset class. Property investors can utilize their residential complexes as student housing by:
- Renting them out
- Using them as well-equipped hostels
- Offering high-quality PG accommodation
- Providing space to colleges/universities for hostels
Challenges in Current Indian Student Housing Market
Unlike other segments of real estate in India, student housing has its own unique set of challenges for builders and investors. They need to pay attention to some important points to get higher returns from their investment in this housing segment.
- As students already face many problems in hostels due to limited services, private builders need to focus on making it perfect. Apart from the size of student housing projects, they also need to pay attention to customized infrastructure.
- To stay ahead in this competitive market, builders need to provide variety of facilities and residential choices for students.
- Students look for housing choices in proximity to their colleges. So builders should carefully choose the location of the project launched in student housing category.
- Builders and landlords need to come up with different leasing policies for students like By-the-bed or by-the-unit.
- As students generally get money from their parents, they look for affordable housing So the builders need to keep property prices in students’ reach.
- Proper management is one of the biggest problems students face in PGs and private hostels. To make student housing successful, there is dire need of qualified managers.
- Safety of students from internal and external threats like theft and fire is a major concern builders need to be careful of.
- Generally, people staying with families don’t prefer to live in a mix society of students and families. So the builders need to launch different projects exclusively for students.
- Demand for apartment sizes by students living in groups of 3-5 differs from normal flats designed for families. They want 1 or 2BHK flats with big halls for group studies.
Student housing is still an untapped market in India with under supply and low occupancy rate. The market has a huge business potential for developers as well as investors. If utilized well, it can become an effective moneymaking class. The demand for student housing is anticipated to grow rapidly. So this is an alternative asset class where real estate investors looking for high yield-based investment products can park their money.
While venturing into student housing, just make sure you don’t just provide a room but improved quality of service. This is the only way to remain in the competitive market and to get secure and steady rental growth.