India is witnessing growing number of educational hubs throughout the country due to increased student mobility from all the states. The growing number of students in these educational hubs has created growing demand of student accommodation which the educational institutes are not able to cater. The educational hubs in India are Delhi-NCR, Pune, Chennai, Mumbai, Jaipur, Nagpur, Kolkata, and Hyderabad. Pune, Delhi-NCR and Chennai have witnessed a strong growth in number of student enrolments in recent years and also increase in number of private higher education institutes. The growth of the education sector on the back of increasing number of students enrolling for higher education each year has caused the emergence of a new sector “Student Housing”.
Over 26 million students live away from home in India, most concentrated in the metros and education hubs. The demand for student housing in India is growing rapidly and this is a new real estate segment that has all the hallmarks of becoming a revolutionary new product in Indian realty sector. The number of students enrolling for higher education each year is also increasing and student housing is product to the growth of real estate market. So 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 asset, that can potentially offer higher yields than commercial spaces. In the US and the UK markets, student housing is already an established and investor-friendly asset because of its size and attractive market yield.
Benefits of Student Housing for Students:-
- A vibrant and dynamic residential community that’s close to classes and campus activities. Many programs and activities support academic and personal development goals.
- Learning to live in an environment that promotes personal growth and respect.
- Helps develop career leadership skills.
- Access to tutorial classes, career workshops, seminars and library.
- Safe and healthy.
- Student housing also paves way for retailers, restaurants and cafes, banks, fitness centres and many such providers to establish their stores allowing them to be profitable leading to growth.
Student housing in India essentially comprises of buildings that primarily offer residential accommodation for large numbers of students in boarding schools, colleges or universities. Recent market conditions for student housing transactions have been generally positive and are expected to remain in the near term because of decreasing new supply trends, robust rent growth and decreasing capitalization rates.
How Student Housing Benefits the Real Estate Market?
1) Ability to increase rents – The students show up regardless unemployment or interest rate levels and they pay the going rate since they have to live somewhere besides adding roommates can keep even increased rents affordable.
2) Growth – High demand by the students for accommodation will lead to a growth of real estate sector invariably providing the opportunity for investors to invest more.
3) Expansion – This gives the investor an idea of what’s driving the market currently and what risks are involved, most importantly where the market is headed in the short and long terms. This allows him to expand his investment in different target locations where he foresees business opportunities.
4) Profitability – While making an investment in residential properties for student housing, location is often the biggest factor in appreciation. As the neighbourhood around housing evolves adding to restaurants, shopping centres and other excursions. Also one can expect a return on investment much earlier due to high demand and therefore enjoy profitability.
5) Branding – A well-maintained property, fully occupied enjoys the benefits of almost free branding as technology these days plays a key role. Information via social media tools flows quicker than word-of-mouth and save from expensive advertisements in the media.
6) Recession proof – Unlike the larger rental market which is subject to economic swings, student housing is recession-resistant and will be practically recession-proof. Student housing is a relatively stable investment.
With the growing demand for housing outstripping its supply, the investment returns are expected to continue far longer. This being a new market and hardly untapped in India, it could be worrisome for few with the kind of risks that they might have to encounter. Student housing has gone through a significant transition in recent years and draws significant interest for developers. It is important for investors to understand the risks that come with the opportunities in this segment.
This guest post has been written by Gunjan Johar, Real Estate Analyst & Home Decor Blogger