PBSA - The Next Megatrend in India

India is home to one of the largest student communities in the world. It is estimated that currently, the university enrollment in India is pegged at around 37 million. A sizable part of the population comprises mobile or migrant students coming from other parts of the country. There are roughly 11 million students who fall within this category.

As the country is home to such a large student population, it is natural that the demand for student accommodation will also be very high. Mostly when students enrol in a university/institute, they prefer on-campus accommodation. However, just one-fifth of Indian universities/ institutes have on-campus accommodation facility, which necessitates the need for other alternatives such as private hostels, lodges, shared apartments, PGs, etc. Most of these alternatives are poorly managed & are not well-organized.

In addition to renting the accommodation, students incur costs for other utilities such as electricity, water supply, leisure, gas connections, etc. This makes living in such accommodations much more tedious.

Amidst such a vast yet unorganized student accommodation market, there is a rising demand for more organized, well-managed & adequately furnished student accommodation options. Thus, Purpose-Built Student Accommodations (PBSAs) are making headway into the Indian student living landscape.

Although PBSA is a western concept, it is increasingly becoming popular in India as well, thanks to the growing millennial class which is not just looking for accommodation but is seeking a complete experience. They are looking for well-furnished student accommodations. Likewise, they are also looking out for more leisure & fun activities in the campus, cohesive opportunities to foster better interaction amongst students & a hassle-free stay. Most of these students come from affluent families & their parents also want their kids to have a comfortable stay while pursuing their education.

Thus, PBSAs are becoming popular in Indian metros such as Delhi-NCR, Pune, Bangalore, Chennai, Mumbai, etc. which are witnessing an expansive educational industry. Interestingly, PBSAs are not just limited to bigger metros as they have started to develop their footholds in other smaller towns such as Vizag, Ranchi, Kota, Lucknow, etc. Apart from institutions of higher learning, such places are home to a large student fraternity enrolled in various popular prep-tutorial centers, thereby fuelling demand for quality accommodation options for students.

The Future of PBSA in India

In tandem with other major educational hubs in the world such as London, Boston, New York, Sydney, Paris, & Warsaw, etc., Indian cities are also witnessing a thriving PBSA market. At present, the total size of Indian PBSA is pegged at around 1.5 million. However, it is a minuscule number when compared to a demand of around 8 million.

This also indicates that the market is set for exponential growth. The rise in the sector is further dovetailed by the expansive role of institutional money in the segment. As per estimates by Knight Frank, a total of USD 100 million has been poured into this sector in 2018. The numbers are set to grow vigorously, looking at the pressing demand. Industry experts believe that more & more institutional players will pivot towards PBSA lured by the attractive potential yield. On the back of higher demands, a PBSA unit can ensure a yield to the tune to 10-12%, much higher than residential or commercial units. Even grade-A commercial office space in the CBD can give a maximum return of around 6-7%.

In the next 5-7 years, over USD 1 billion of institutional money is expected to flow into the burgeoning segment. Major developers are also entering the space to capitalize on growing demand. Existing landlords are also realizing the latent attractions associated with such asset classes. They are increasingly leasing out their old-fashioned accommodation to developers to give them a facelift & make them suitable to the changing preferences of the student fraternity.

As per the estimates by 360 Realtors, India’s leading Real Estate advisory, the PBSA segment will continue to grow at a CAGR of around 9% in the times to come. The growth will be underpinned by a growing higher education sector, rise in migrant student population & the growing emphasis by the government on higher education in India. The momentum will also be pushed ahead by the rise in international students in India as well. At present, India enjoys a very small portion of the overall international student base. Out of the global international base of around 5 million, India at present is home to just 50,000 students. However, the country is set to quadruple the numbers, as the government is seeking policy overhauls to morph India into a commendable center for international students.