Student Housing – The Next Big Real Estate Asset Class?

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Globally, student housing is acknowledged as an important and lucrative real estate segment, generally included under ‘alternative’ real estate asset classes. In its current form in India, student housing essentially comprises of buildings that primarily offer residential accommodation for large numbers of students in boarding schools, colleges or universities. However, the residential facilities in such institutions are invariably severely under-equipped to match the demand for them. Also, the services and amenities they often fall far short of the international standards seen in established student housing markets such as the US or UK.

 

The education sector in India is growing rapidly. With the increasing number of students enrolling for higher education each year, student housing is obviously a complimentary product to this growth. Interestingly, the opportunity has come at a time when residential real estate (largest sector accounting for close to 85% of the value of investable real estate market) is currently slow and certain developers could bank on this opportunity to transform specific under-construction residential projects into student housing, bringing it under the more lucrative rental-yielding commercial project stream.

 

Emerging concepts like student housing can help developers and investors diversify into an income-yielding asset class that can potentially offer higher yields than the commercial office and retail properties because of a favorable demand-supply scenario.

 

In the US and UK markets, student housing is already an established and investor-friendly asset class because of its size and attractive market yield. Globally this segment, which has already attracted 200 billion dollars of investment, is essentially operated on a lease rental basis. Student housing in London has gained prominence mainly because of the higher yield rate, which has recently been 4.5% versus commercial yield rates of 3%.

JLL