Student housing firms eye rapid expansion as demand rises post-Covid

Student housing firms eye rapid expansion as demand rises post-Covid

2 Jul    Finance News

By Raghavendra Kamath

Buoyed by demand for good quality hostel rooms post-Covid, student housing companies are beefing up their expansion plans.Good Host Spaces, co-owned by Goldman Sachs and Warburg Pincus, for instance, is looking to have a capacity of 100,000 beds in the next three years.

Currently, it has 38,000 beds.”We are in talks with a lot of colleges. If not for the pandemic, we would have achieved this target next year,” said Nimesh Grover, chief executive of Good Host Spaces.He said the company is adequately capitalised to meet its target of 100,000 beds. There is a huge demand for rooms with attached toilets, rooms with lower occupancy, among other factors.Grover said the company may also look at off-campus properties.

“Existing stock of colleges is bad, and colleges are not improving quality of accommodation. That’s why they are losing market share and private operators are gaining market share,” he said.Tribe Stays, an off-campus housing provider, plans to add between 1,000 and 1,500 beds during July 2022-July 2023 and hopes to achieve the target in addition to 5,000 beds for 2023-24, said Yogesh Mehra, founder and CEO of Tribe Stays.

The company is also branching out into the co-living segment for working professionals or millennials. This will give a huge push to the expansion plans considering that the co-living market is much larger than the student housing, Mehra said.He said Tribe Stays has enough resources for the current project launch at Wakad in Pune, which was funded with the help of offloading a small portion of equity to an HNI.

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For the larger expansion in coming months or years, the company is in talks with funds and family offices of certain industrial houses for a combination of equity and structured long-term debt options. “We’re certain to close on one of them in the coming quarter,” he said.

Tribe Stay’s student accommodation at Wakad has 210 beds spread over about 35,000 square feet. It has facilities like a gymnasium, a 70-seater commercial cafe which will be open to all, entertainment zones and planned break areas on every floor.

Co-living operator Curated Living Solutions is looking to add 5,000 “asset-heavy beds” under student housing and 5,000 “asset-light” beds across the country, in addition to its existing strength of 7,000 beds in this financial year. It is looking at a 100% growth rate year-on-year for the next three years, said Jaikishan Challa, founder & CEO, Curated Living Solutions.In “asset-heavy beds” it invests in properties besides managing them, but in the “asset-light” model it is just a operator of the facilities.

It is looking at an investment of $200 million over a period of four to five years, and an alternative housing platform which will focus predominantly on student housing apart from pro-living and industrial housing, he said.

“Post-pandemic, we have seen increased demand for hygienic and low-density spaces both from institutes and parents. We believe for a very long time on-campus hostels have been a liability or cost centres for the institutes and when we approach them with our boutique of services most of them welcomed us with a sigh of relief,” Challa said.

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Curated Living earlier this week collaborated with Andhra Pradesh MedTech Zone (AMTZ) to launch a student housing facility in Visakhapatnam. The 500-bed facility will offer accommodation to students of medical institutes on the premises of AMTZ.
Anuj Puri, chairman of Anarock Property Consultants, said with colleges and educational institutes reopening physically, demand is gradually inching up.

“This demand will only grow in the months to come as more and more colleges and educational institutions reopen. However, one major change that we may see post -Covid is that demand for the organised players may increase. Given that student housing so far in India has been dominated by the unorganised players, there is scope for more organised players to enter the fray,” Puri said.

The operators have also increased room charges to cope with inflation in the last one year.For instance, Tribe Stays has increased room charges by 15 to 20% in Mumbai and Pune. “We have increased charges due to everything getting expensive due to inflation and the demand for premium student housing increasing multifold since 2020. This also is helping us cover some of our losses incurred due to the pandemic,” said Mehra of Tribe Stays.

Good Host has also increased charges in line with inflation, said Grover.

Many say parents are not complaining about the increase in charges. A senior executive of an investment firm said: “If parents were paying `10,000 a month pre-Covid, today they are ready to pay `20,000 if they are convinced with the facilities and hygiene. They want quality spaces.”

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