Student housing may get up to Rs 2-trn investment, PE funds bet on sector

Private Equity (PE) funds are betting a lot on student housing, since there are better returns here as compared to other classes of commercial real estate. 

Student housing could, says realty consultancy Knight Frank, attract $29-30 billion (Rs 2 trillion) of PE funds in the coming years. The current estimated demand-supply gap is eight million beds. 

Its number is based on an average value of $6,250 a bed (Rs 430,000) on Rs 120-150 a sq ft, including construction and furnishing cost.

The demand is expected to grow at 8 per cent annually until 2025, to around 13 million beds, Knight Frank said.

In 2017, Goldman Sachs acquired 74 per cent in Yoho, the student living business of Manipal Education and Medical Group, for $54 million. Yoho manages a little more than 8,000 beds. In 2018, Warburg Pincus set up a joint venture with Lemon Tree with an investment of $291 million to invest in student housing. In 2019, HDFC took 25 per cent in Good Host Spaces, which offers student housing under brand ‘New Door’.

According to Saurabh Mehrotra, national director at Knight Frank, around half a dozen PE funds have plans to acquire or build 60,000 to 80,000 beds in all. 

According to another consultant, JLL, student housing has a potential yield of more than 12 per cent annually as against commercial properties where yields are seven to 10 per cent. 

The recent Union Budget announcement on ‘Study in India’, aimed at bringing foreign students to study in this country’s higher educational institutions, will boost the market, experts said.