Emerging Trends of Student Housing in Indi

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New Delhi, 26 September 2019: Student Accommodation Provider Association of India (SAPFI) and CBRE – world’s largest real estate consulting firm – today released the findings of its research on Student Housing – an emerging real estate segment in the country. According to the report titled “The Herald of a New Chapter: Student Accommodation in India”, the Student Housing/Co-Living space is expected to witness an investment worth USD 700 million and an addition of 0.6 million beds by 2023 across the country. The Student Housing segment is witnessing rapid growth across all the major markets in the country and expected to witness a growth of 36 percent between 2019 to 2023.

The SAPFI-CBRE report was unveiled by Shri Durga Shankar Mishra, Secretary, Ministry of Housing & Urban Affairs, Government of India, in presence of Harish Nair, Executive Director, Consulting & Valuations, CBRE, along with Kaushal Mahan, Convener, Student Accommodation Providers of India (SAPFI)

On the occasion of unveiling of the report, Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE said “Increased mobility among students and growing number of private higher education institutions has led to the emergence of new educational hubs in the country. Larger states such as Uttar Pradesh, Gujarat, Maharashtra, Karnataka, Rajasthan, Madhya Pradesh, Tamil Nadu and Andhra Pradesh account for a major share in colleges across the country. Most of these states have witnessed a steady pace of student enrolment in the last few years. Consequently, cities such as Bangalore, Jaipur, Hyderabad, Pune, Nagpur and Mumbai housing prominent educational institutions have emerged as educational hubs.”

Kaushal Mahan, Convener, Student Accommodation Providers of India (SAPFI) said “Our goal is to support the growing needs of India’s large student community for high quality and secure accommodation. Standardization of the sector through minimum standard regulations and a separate definition as a distinguished asset class holds the key to unlocking the potential of professionally managed student accommodation sector in the country.”

While releasing the report, Harish Nair, Executive Director, Consulting & Valuations, CBRE, said “Student housing provides a great potential due to the increasing student population that travels to different cities due to educational requirements. The rising influx of migrant students in a few states have created strong demand for student accommodation, and the campus facilities at educational institutions are unable to cater to this demand. With the government targeting a GER of 30% by 2020-21, the segment provides a huge potential for developers to tap into this opportunity and provide facilities in accordance with the changing needs of the students”

Key Highlights of the Report:

Ø  On an average, currently, only one hostel bed is available to six students enrolled for higher education in the country

Ø  Tapping this gap, the top 30 players in student housing/co-living space offered a cumulative stock of more than 250,000 beds as of August 2019; stock to witness a CAGR of 36% between 2019-2023.

Ø  Student enrolments in the country has increased from 32.3 million in 2013-14 to 36.64 million in 2017-18

Ø  The government is targeting a gross enrolment ratio (GER) of 30% by 2020-21, which will result in a further increase in the number of students enrolled for higher education

Ø  More than USD 700 million committed as investments in the student housing/co-living sector* by players such as Warburg Pincus, Sequoia Capital, Goldman Sachs, HDFC amongst others.

 

Emerging trends:

  • Most of the operators in co-living/student housing are not only active across major cities but also have a presence in educational hubs such as Dehradun, Jaipur, Chandigarh, Indore, Vadodara, Jalandhar and Kota. These cities have a greater number of migrant students than most other cities, thus marking their scope for student accommodation.
  • If we look at the top 30 players that operate in India in the student accommodation industry / co-living space, the cumulative stock of beds of these key players was more than 250,000 as of August 2019. This stock is spread across various Tier 1 and Tier II cities across India.
  • As per the report, only one hostel bed is available to six students enrolled for higher education. This poses as a great opportunity for investors as it’s a nascent market with a significant scope for scalability, that will allow for higher yields than traditional assets. Additionally, there are numerous Tier II markets with significant student population but affordable RE assets.

Key demand Drivers for Student Accommodation:

  • Buying Trends: Change in buying trends from ownership to rentals and cost sharing
  • Rising Student Population: Student enrolment has increased from 32.3 million in 2013-14 to 36.64 million in 2017-18
  • Spending Appetite: Increase in spending appetite towards achieving a better standard of living
  • Availability of limited options: Availability of limited fully furnished rental options in the traditional student accommodation rental market
  • Branding: Pursuit of brands by the millennial population in every activity they pursue

Some challenges faced by the student accommodation industry in India:

 

Maintaining the affordability quotient: Changing expectations of students in terms of residential facilities being offered and increase in competition are likely to affect the market price for assets, thus driving up the overall rents.

Underdeveloped rental housing sector: As the rental housing market in India remains unorganised and opaque, quality and trust issues are the top challenges that both landlords and tenants face.

Safety: As the number of female students constitutes more than 47% of the total student enrolments in India, it is imperative that student housing accommodations can tick the boxes on safety, security and predictability of service.

More policy support needed: Government entities in India have not yet taken a keen interest in promoting the industry. An assessment of the contribution of the sector needs to be made and sops should be allowed; for instance, currently student accommodation industry venture attracts the same tax rate as any other corporate.

However, the Model Tenancy Act 2019 may impact the student accommodation industry positively: In order to reduce the current housing gap in the country, the Act has proposed to overhaul the legal framework that currently governs rental housing, thereby encouraging private participation in the segment. This move is expected to impact the student accommodation industry as well.

Harnessing the potential of the private sector

Developing private-public partnerships (PPP) will benefit the industry in two ways – it would bring industry expertise to government-mandated projects, thereby helping turn India into an education hub. Below is how the government can leverage the PPP model for this industry,

  • Private players can partner with city municipalities, urban development departments to provide PMSA facilities to students of various universities and higher education institutions
  • The Government of India is already running several schemes for maintenance and construction of hostels such as ‘Youth Hostel Scheme’, ‘Construction of Women’s Hostels in Polytechnics’, ‘Construction of Women’s Hostels in Universities’ and many others. Integration of PPP models with such schemes will not only enable the government to access better resources but also bring in the industry experts
  • The PPP arrangement can also be applied as a build-operate-transfer (BOT) model wherein a private player will finance the development and operations of a student accommodation project for a specified period. At the end of this period, the ownership is transferred to the government agency once the developer has recovered the costs and made profits
  • In addition, existing hostel facilities in universities and colleges that are in need for redevelopment can engage in PPP models to create better facilities for the students