Student housing, an emerging concept

Globally, student housing is acknowledged as an important and lucrative real estate segment, generally included under ‘alternative’ real estate asset classes. In its current form in India, student housing essentially comprises of buildings that primarily offer residential accommodation for large numbers of students in boarding schools, colleges or universities. However, the residential facilities in such institutions are invariably severely under-equipped to match the demand for them. Also, the services and amenities they often fall far short of the international standards seen in established student housing markets such as the US or UK. 

Interestingly, the opportunity in India has come at a time when residential real estate (largest sector accounting for close to 85 per cent of the value of investable real estate market) is currently slow and 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 commercial project stream. 

As per Subhankar Mitra, Local Director – Strategic Consulting, JLL India, student housing can help developers and investors diversify into an income-yielding asset class that can potentially offer higher yields than the commercial office and retail properties because of a favourable demand-supply scenario. 

He says, “In the US and UK markets, student housing is already an established and investor-friendly asset class because of its size and attractive market yield. Globally this segment, which has already attracted $200 billion of investment, is essentially operated on a lease rental basis. Student housing in London has gained prominence mainly because of the higher yield rate, which has recently been 4.5 pc versus commercial yield rates of 3 pc.” 

The potential for success of the student housing real estate market in India could be similar or even more to that in the UK. Some of our cities, such as Chennai, Bengaluru and Pune see high annual student enrolments. There are 34 million students in India for higher education, of which 76 pc (26.6 million students) migrate from different states to these cities and invariably require accommodation. A broad estimate indicates that currently, cities like Pune and Bengaluru can only accommodate about 18-20 pc of the inward migrating students. 

Mitra remarks, “Student housing as a product is severely under-supplied in the major markets, and has the potential of high and sustained occupancy rates. This provides a marked opportunity for investors focused on attractive yield-based real estate products. Concurrently, student housing in India has immense scope to be developed as an asset class for developers.” 

He adds, “This is a new and largely unfathomed asset class in India. However, so were malls and serviced apartments at one point in time - both products which have now successfully transitioned into organised sectors, and are moneymaking asset classes. The demand for student housing in India will continue unabated and in fact grow rapidly, so this is alternative real estate segment has all the hallmarks of becoming a revolutionary new product in Indian realty.”