Why student housing is gaining ground in India

More and more people are moving to big cities for education and jobs. While that’s been happening for a while, what’s changed now is that a growing number of companies are now trying to tap into the needs of new migrants, especially millennials. In the last few years, besides traditional forms of rented accommodations like hostels, paying guests and shared apartments, organized accommodations such as co-living and student living have come into existence, and these organized offerings come with better services and facilities. 

In fact, many companies are now especially focusing on the needs of migrant students and offering student living exclusively. For instance, on 6 June 2019, Stanza Living, a student housing company which provides accommodation facilities especially to students forayed into seven new cities— Hyderabad, Chennai, Coimbatore, Indore, Baroda, Pune and Dehradun. With this, the company has reached a national inventory of 22,000 beds across 10 cities. However, Stanza Living is not the only one offering services in this segment. While Stanza Living started operations in 2017, PLACIO, another student housing management company, was established in 2016 and has a presence in Delhi, Noida, Greater Noida, Lucknow and Indore.

Oyo, one of India’s largest hospitality company, also announced recently that it will be entering the student housing segment soon. (To read more about OYO’s plan, click here). OYO has already launched Oyo Life, a long-term rental housing business targeting young professionals, millennials and students.

Need for student housing

India is a developing nation and opportunities in urban areas for employment, education, and better lifestyle have been the pull factors for small-city and rural populace. The first challenge this migrant population faces is finding proper accommodation, and students top the list. According to a survey by property consultant firm Knight Frank, Global Student Property Report 2019, released on 7 June, “India has the youngest population in the world, with some 18% of the 1.3 billion-strong population aged between 15 and 24. More than 34 million students are currently enrolled in courses at universities across the country, and this figure is expected to rise.” Further, as per the survey, “the current demand for purpose-built student accommodation (PBSA) bed spaces across the country is estimated to total more than 8 million.”

The market for student housing in India may still be at a nascent stage but there are a number of factors that are expected to drive growth in this segment in the coming years. One of the primary reasons for this is that few institutions or colleges in India provide sufficient accommodation facility to students. “Only 20% of the current demand is met by university-operated supply. This is despite a survey undertaken by the Indian Human Resource Department which indicates that the majority of students would prefer on-campus accommodation. Existing capacity is limited and new development has ultimately not kept pace with the growth in enrolment,” according to the Knight Frank report.

Besides, a large number of students come to metros to prepare for entrance exams, civil services, corporate jobs and so on. This segment has no option but to stay in private hostels and lodges. According to the Knight Frank survey, “the majority of this accommodation is operated outside of university control by private owners. Often it is off-campus, of poor quality and with little modern value-add facilities such as WiFi or laundry services.”

Some students also live as paying guests (PG) or in shared apartments, but finding a decent PG or a flat mate could be a daunting task.

Cost and returns

Organized students’ accommodations charge as much as or a little more than what you will pay for private hostels or lodges, in most cities. For instance, the cost of one bed in a private girls’ hostel in South Delhi is about ₹18,000-20,000 per month, including meals, whereas Stanza Living is offering one bed at the rate starting ₹11,500 per month (without meals) around south campus, Delhi. Charges also differ based on the city and location within a city. For instance, Oxfordcaps.com, a student housing portal, offers one bed for girl students, starting at the rate of ₹8,199 per month, near Reva University that’s situated on the outskirts of Bengaluru, but charges minimum ₹14,000 per month near M.S. Ramaiah University of Applied Sciences, which is in the heart of the city.

Besides catering to the needs of students, this segment is also expected to generate higher returns for investors. According to a 2018 report by JLL, a real estate consultant firm, “student housing has the potential to yield more than 12% returns vis-a-vis the core commercial sector in which returns remain range-bound between 7% and 10%. Further, this sector is expected to grow at 38% CAGR until 2020, to ₹2,400 crore.”

As of now, there are only about 20-odd organized firms in the student housing space. Though the facilities they provide are far superior than what other options offer, it may still take a few years for the space to come up in a big way.