Real estate developers yet to warm up to the new asset class due to absence of tax breaks
Private equity investments into student housing were as minimal as $60 million in the last two years. Since there are no specific tax rebates for student housing ventures, real estate developers have not yet warmed up to the new asset class even though startups have entered the segment, says a real estate consultant.
Sensing the potential of the student housing market, many startups have entered the fray. The top 10 players in the organised student housing space collectively operate slightly over 75,000 beds, with plans to touch nearly 2 lakh beds by 2020, says Anarock Property Consultants.
With no major developer currently into it, Indian student housing is still in its infancy. Developers could reference successful models in the US and the UK markets, where student housing is already established as an investor-friendly asset class.
Serving as a benchmark for developing markets like India, UK has developed a range of student housing models which clearly delineate how functions and responsibilities are shared between universities and private developers, says Anuj Puri, Chairman, Anarock Property Consultants.
The huge demand-supply mismatch is reason enough for developers to warm up to this sunshine sector and earn high rental yields – projected to be anywhere between 14 percent and 17 percent, they are much higher than established asset classes like residential and commercial real estate.
As per data provided by the Ministry of Human Resources and Development, India currently has over 36 million students pursuing higher education. This population is increasing year-on-year, and more than one-third comprises of migrant students who throng to educational hubs such as Pune, Bengaluru, Gurugram, Mumbai, Noida, Nagpur, Kota, among others.
Student housing generates a massive demand of more than 10 million beds across major Indian education-focused cities. Hostels and residential facilities in most educational institutes barely meet 18-20 percent of the student housing demand.
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