Education booms in India, offering opportunity to real estate developers
Dehradun, the capital city of Uttarakhand state in North India, is one of the country’s emerging education hubs.
Real estate developers, sensing opportunity, are piling in to supply housing for the city’s growing number of students.
Around the world, student housing has been increasingly in demand with investors. Low interest rates have pushed investors to hunt for higher returns in less-trodden areas of the property market, such as student housing, care homes, and data centers.
Growing student populations have added to the attraction. India has seen a steady rise in the number of higher-education students to the current 34 million. Of these, over 70 percent are in the biggest 10 states.
And Dehradun, with its 14 national-level universities and 12,000 enrolled students, is an example of how wide the trend is spreading. It is just one of the many emerging education hubs in India, says Shobhit Maleta, Founder & CEO, Indecampus Student Accommodations.
“There is good growth potential in education cities for student housing developers,” he says.
Maleta’s company is developing Purpose Built Student Accommodation (PBSAs) projects in Dehradun, and is on the verge of completing PBSAs in other cities such as Ahmedabad, Bengaluru, Baroda, and Sonepat.
Other companies are also focusing on identifying opportunities and providing the scale.
Saket Jalan, founder of Bengaluru-based Campus Students Communities Pvt Ltd, says “We are looking at doing bigger projects across cities. That is where the market is headed. Even investment funds are looking at larger projects.”
The demand is there, developers say. Excluding the limited number of hotel beds for first year students in these colleges and number of local students, students away from home are looking for quality spaces.
In India, private home-owners continue to dominate the student-housing market. The majority of students either rent apartments in groups or prefer to live as paying guests outside the university campus.
These are often nestled in pure residential areas, which may not provide an ideal ecosystem for a student. But given the dearth of quality private hostels and the lack of choice, it has become a norm.
While there is demand, the market is yet to see the required supply, in part because of the country’s unorganized rental market and limited supply of quality accommodation.
“It will take three to four years for quality supply to come up across these cities,” says Vijay Rajagopalan, Head – Alternatives Business, JLL India. “For developers, price points for this nascent market are yet to be established in these cities.”
Still, investor interest is growing for the student housing that does exist as the hunt for yield continues. In a recent report, JLL places the yield rate for student housing at anywhere between 15 and 18 percent, significantly higher than office and retail.
“Investors who are not tied to a particular location are looking at established demand across cities,” says Rajagopalan. “Any opportunity that brings 3,000 to 10,000 or more beds (across multiple assorted projects) will fit the requirement of many investors.”