How student housing operators are adapting to new norms

August 14, 2020: The current pandemic has raised some questions for the student housing segment which is undergoing a temporary blip and several service providers have had to incur additional facility management costs.

Approximately 83,000 students in Greater Noida alone require accommodation and form the potential segment of student housing. The student housing operators will have to evolve and adapt to the new norms in the wake of the pandemic where health and hyg­­­­­­iene would be the critical focus.

Operators will have to innovate their services that would help differentiate them from regular PGs and guesthouses. It is also an opportunity to institute industry-leading measures for delivering better services safely, hygienically and seamlessly to residents across cities in India. There is a significant shift towards the flight to quality. Many players have introduced several interventions such as the no-touch dining facilities among others during COVID-19.

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Greater Noida is expected to receive a steady demand from students in the future owing to a large number of educational institutes present in Uttar Pradesh. Greater Noida represents a significant market for student housing with more than 100,000 students and 28,000 students enrolling each year for various courses, it said.

Approximately 83,000 students require accommodation and form the potential segment of student housing. For these students, there is an availability of primarily three types of housing segments. Almost half comprises of housing provided by national and local operators who offer accommodation to the majority of the students. Some of them operate on a structured basis offering amenities.

As much as 27 percent consists of hostels provided by the educational institutes on campus and 18 percent comprises of small-scale paying guest accommodation and apartments rented out in residential colonies.

A major educational hub of Uttar Pradesh, Greater Noida has more than 50 educational colleges. About 65 percent of the 83,000 students are from outside NCR and 18 percent from distant areas of NCR.

And 73 percent represents the primary market that can be serviceable through improved and quality housing facilities. With on-campus hostel supply ranging between 20,000 to 22,000 beds, there stands an addressable market of more than 60,000 to 65,000 students which can be catered by the organised student housing operators.

Knowledge Park and Sector Pi have emerged as preferred areas by students due to their proximity to all the major educational institutes in Greater Noida.

Going forward, it is expected that the off-campus student housing market will comprise of approximately 50,000 beds. Further, the share of organised student housing operators is expected to increase, backed by better facilities and services offered by them. There is a demand-supply gap of 10,000 to 13,000 beds.

If the pandemic continues for long, the rent for student housing facilities is slated to decline by 20 to 25 percent over the next few months. The sector may also consolidate with some smaller operators exiting, resulting in stronger players with a sustainable financial and operational model.

“The B2C model, where most students pay monthly, has seen a larger impact. Students who have left are less likely to pay their monthly rentals for the remaining two months. But most operators have two months of the refundable security deposit which may help them avoid revenue shortfall, though students may use force majeure as a reason to claim refunds,” said Gaurav Karnik, Partner and National Leader – Real Estate, EY India.

From a cost perspective, more cleaning and fumigation will be required. Facility management costs account for 10-15 percent of overall costs and this is expected to go up marginally.

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