When the residential market in India is gradually looking up and the commercial segment is eagerly awaiting the launch of the first real estate investment trust (REIT), there is something else which is trying to create its own niche in the Indian real estate market. Student housing is at its nascent stage in India and is increasingly attracting the attention of developers and investors alike.
Student housing is the new bright star on the alternatives sector segment and is set to shine brighter in the future. As per a recent report by JLL, titled “Future of India Real Estate: Deciphering the Mid-term Perspective,” student housing has the potential to yield more than 12 percent returns vis-a-vis the core commercial sector in which returns remain range bound between 7 percent and 10 percent.
The report also mentions that the student housing market size is expected to increase at a whopping 38% CAGR until 2020, from INR 1267 crore to INR 2,400 crore. At present, there are 15 players dominating this space, cumulatively operating around 84,500 beds. The firms plan to grow to 1,60,000 beds by 2020. Click here for the complete report.
As per 2011 census data, there are approximately 8 million students in India who require student accommodation in close proximity to their university campuses. Since the college hostels fail to provide accommodation to every student, there is a huge gap in demand and supply. This gap was earlier being filled only by privately run PGs and rental houses.
The student housing sector was formally initiated in 2003 when the first set of student housing operators, Bright Youth and Aarusha, entered the market.
By 2016, student housing earned a reputation of being an asset class that is not only counter-cyclical to the core real estate asset classes, but also somewhat recession-proof. A plethora of student housing operators now exists in the market including Placio, Zolostays, Yourspace, Coho Dorm, CampusVille, Indecampus, Stanza Living, Youthville and Care Infra Student Housing.
The operators have also started to spread to smaller cities like Kota, Manipal, Indore, and Dehradun, rather than restricting themselves to Bangalore, Pune, Chennai, and Mumbai.
Student housing players generally charge on a per bed basis with a host of facilities such as food, WiFi, laundry, security, gymnasium, leisure activities, independent kitchenettes, food delivery, and even shuttle services to colleges thrown in.
The charges vary from city to city. Like, market leader Your Space reportedly charges anywhere between Rs 12,000 to Rs 25,000 per bed depending on the city and location.
The firms often partner with property owners and developers on a fixed lease, revenue-sharing, or management contract basis for 5-15 years. They then remodel and redesign the properties according to students’ needs and requirements.
What’s In It For Investors
It’s a win-win situation. An investor gets to pre-lease a property or is assured of confirmed rentals even before the property is ready.
“In the long run, this model could actually provide more yields than a conventional real estate asset – it could even offer 14-15 percent,” Your Space co-founders Shubha Lal, Karan Kaushish and Nidhi Kumra told Money Control.