Students Accommodation Stares At Brighter Future

The Indian real estate sector, which was already reeling under the pressure of muted demand, has been hit hard after the nationwide lockdown. As economic activity plummeted, investments in the sector decelerated. Experts feel that it would take at least two quarters to normalise despite improving sales in most markets. However, some emerging asset classes stare at a brighter future.

In a conversation with Outlook Money, Ajay Rakheja, Head (Commercial), 360 Realtors, shares how student housing is one such asset class offering smart returns at less risk.

“In a country that boasts one of the largest pools of universities globally, investment inflow of around $100 million has racked up over the years in the student housing segment. It is expected to rise further in the post-COVID world because most students and their parents would not mind paying a premium for organised and well-managed community living with improved facilities. They would want increased hygiene, sanitised environment and larger well-furnished spaces,” said Ajay Rakheja.

India is home to one of the largest student populations in the world. Hundreds of thousands of students migrate to larger cities from towns and rural areas every year. According to All India Survey on Higher Education (AISHE), in 2019, almost 33 million students enrolled in full-time courses across 39,900 colleges across India,

“It is estimated at least half of the students enrolling for a course migrate to colleges from towns, cities and rural areas every year. According to the survey, 6.60 million beds are available for these students, translating to a gap of over 8. The government’s new education policy will lead to further growth in higher education in the country,” Rakheja explained.

The new policy aims to increase university education access by 50 per cent for high school students within 2035 and quadruple its international students intake to 200,000 by 2023.

“Currently, private hostels and paying guest facilities serve around 85 per cent of the market alongside on-campus hostels,” he said, “these are mostly unorganised and not well managed.”

“However, in a post COVID world, emphasis on quality and hygienic accommodations will rise. Parents will be willing to bear incremental costs in return for better facilities. It will naturally translate into higher demand for organised student accommodation with facilities like larger furnished room spaces, food courts, leisure activities, indoor games and fitness centres and improved sanitisation with medical facilities,” he said.

Besides university education, mushrooming coaching centres for Joint Entrance Examination (JEE), civil services, government jobs, medical entrance, and chartered accountancy will also increase students’ demand for better accommodation facilities.

According to Rakheja, India’s organized student housing sector will offer increased returns at lower risks because higher education would largely be unaffected by the current economic shockwaves. With education set for uninterrupted expansion, the demand for organised student housing facilities will pick up further. Occupancy rates for student housing are generally higher; it would contribute to improved returns.

“Although the downside risk of online education persists, it is a transitory phenomenon,” he said. “Most schools and classrooms are likely to open soon since virtual classrooms have their drawbacks. Institutions cannot fully replace classroom-based learning experience with online classes although these have their own sets of advantages,” he concluded.