Education sector boosts real estate in India

Higher education scenario in India

As per data, higher education system in India has expanded at a fast pace by adding nearly 20,000 colleges and around 8 million students in a decade from 2000-01 to 2010-11. Indian higher education sector is expected to surge at a compound annual growth rate (CAGR) of 15% by 2013 with increase in investment. As of 2011, India has 42 central universities, 275 state universities, 130 deemed universities and 90 private universities.

However, there is still huge scope for further development of higher education as 86% of students complete graduation, mere 12% opt for post-graduate education and barely 1% go for research in India as of the current scenario. India suffers from lack of basic infrastructure and low volume and quality of research.

Real estate scope

As the country’s current GER at 12% is less than half of average global GER at 26%, the government wants to pursue the goal of achieving the targeted GER in an aggressive manner. It translates to the fact that additional requirement generated by the education sector opens up huge potential for the real estate sector. The government has targeted to achieve 30% Gross Enrollment Ratio (GER) in higher education by 2020.

If the targeted GRE is to be achieved, then India will require an additional realty space of over 5,500 million sq ft by 2020. The required educational space excludes cafeteria, hostel, retail and recreational facilities.

The government’s focus in the growth of educational sector is an effort to develop the country’s higher studies sector along with encouraging the students moving out of India for higher education to search for educational opportunities in India. An additional enrollment of 37 million students over the next eight years would mean that a surge in real estate activity is the need of the hour in next few years to meet the demand for a huge amount of physical space.

Education sector: New realty destination

Real estate sector in India has been struggling in the past year. It has been affected by sluggish sales and cash constraint. Small and medium developers have been particularly hit as demand from home buyers has been low due to overpriced housing market in most of the cities. Housing demand in India’s six main markets has declined around 40 percent in the past one year. New project launches have seen a drop of nearly 50 percent. As a result, non-core businesses such as education sector with the projected demand in the coming years holds the key for future a sizable number of players.

The widening gap between demand and supply in education sector can be a boon for the real estate sector. Education sector is looked upon as recession free sector and as such it is being deemed as a good time for investing into the sector by many developers. Analysts have pointed out that diversification at this moment, although may be seen as compulsive, may turn out to be a successful move on the part of developers.

Diversification is not an entirely novel concept for realty in India. Even in the hey days of real estate boom, developers have ventured into sectors like telecom and health care. Developers, including Prestige Group, Mantri Developers, MCN Group and Salapuria Developers, have already ventured into higher education sector in the recent past and it can only be assumed that more developers will enter the sector to cash on the opportunities.

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