Indian students are short of 8 million beds-- and there's a lot of money to be made
- Knight Frank's latest report pegs the shortage of beds among university students in India at 8 million.
- The report has also estimated that the shortage can rise to 13 million by 2025.
- Lemon Tree Hotels which is investing in student housing under the Hamstede brand expects the new business to eventually help its hotels too.
"The purpose built student accommodation (PBSA) market in India is in its infancy, despite the country boasting one of the largest populations of undergraduate students in the world," Knight Frank said in its 'Global Student Property 2019' report. The net shortage right now is around 8 million right now and can rise to 13 million by 2025. And these are just in the big cities.
Private property owners and hostels meet some of the demand but quite often, they do not meet the students' expected standards. In many places, landlords are reluctant to lease their homes to a student or a group of students due to fears of their own.
Wherever there is unmet demand, there is an opportunity to make money. Investors have poured in about $100 million in the space so far but that's not enough either. About $1oo million have already been invested in creating spaces for migrant students but there is space for a lot more.
How the investors view the opportunity
"The market is 10 million students, who are not in the campus but are migrants, who are staying various types of paying guest type of accommodations," Patanjali Keswani of Lemon Tree Hotels told Business Insider earlier this year.
Lemon Tree Hotels is the country's biggest chain of budget hotels, which is also expanding into other spaces like co-living and student housing under a different banner called Hamstede.
Global private equity major
The board of Lemon Tree has approved an initial investment of $5 million (₹35 crores) in the joint venture. Including the share of Warburg Pincus and the debt Hamstede can raise over the equity, there will be a total investment of $50 million by the end of 2019. "To me this is exciting because these students are future mid-market, aspirational customers," Keswani added highlighting the potential for his mainstay hotel business.
"The forecast is highly promising and is likely to offer investment opportunities in this alternate asset class for domestic and international investors” Knight Frank India CMD Shishir Baijal reportedly said.
SLIDESHOW: All you need to know about the future plans of Lemon Tree Hotels