Student Hostel Accommodation in India

Shared Economy: Student Hostel Accommodation in India

2020

Shared Economy: Student Hostel Accommodation in India

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Background

Globally, the rise in population and rapid depletion of resources has driven a need for technological innovation and redefining the aspects of businesses. Economies have been striving for sustainable and community driven solutions with the aim for collaborative consumption. Over the years, the need to only realize and quantify the potential of underutilized resources but to devise meaningful ways to put them to better use has come into existence. This need is being facilitated with the help of technology to create a generation of ‘asset light’ and a sustainable structure, also called the ‘Shared Economy’. The Shared Economy is based on the concept of sharing and expressing one’s identity without ownership. The idea is temporary ownership or access-based consumption. It helps integrate capital consumers with technology and a digitally connected economy which can include:

  • Shared Mobility (Uber, Ola etc.)
  • Recirculation of Good/ Rentals (eBay etc.)
  • Utilization of Assets: Co-working Spaces (WeWork etc.)
  • Utilization of Assets: Co-living Spaces (AirBnb, OYO etc.)
  • Shared Services and Community Building (EatWithMe, Task Rabbit etc.)

India, has one of the largest youth population in the world including a high millennial concentration, and an aspirational and growth driven community of individuals who are willing to adopt shared assets and services.

India is home to one of the youngest populations in the world. We are also blessed with a growing and upward mobile middle class. With an increasing potential and rising aspirations of the youth, more and more educational institutes have opened up to help facilitate their growth. Even as these institutions are essential in building the foundation of a strong and successful youth population, there are not enough support structures for them to function smoothly. These include everything from decent accommodation facilities for students to basic amenities and adequate development opportunities.

Key Takeaways

  • It has been well established that the student hostel accommodation industry is a real estate gold mine with a massive growth potential. According to ET, there were reports of USD 700 million being injected in the sector over the next 3 years.
  • With the decline in investments and stocks over the last few months in the wake of Covid-19, India’s GDP growth estimates have fallen by almost 50%. In addition, the overall financial system remains weak and burdened and has created an uncertain atmosphere to generate optimistic projections.
  • Even though these conditions will limit the upward credit growth which was. Earlier, almost doubling the current supply in less than half a decade, there will be a reasonable influx of investment, new players and healthy competition in the market. Even as these players bring new innovations to the table, the industry, currently, is mostly unorganized with key competitors such as Stanza Living, Placio, OYO Life, among other only being able to tap into about 0.5% of the potential market size. This leaves the scope for new players to still tap into the largely untouched market and drive profits post reasonable recovery of the Indian economy.

As per the sample survey conducted by TSB, the sentiment of parents and students across the country reveals a common desire for proper, well- managed living spaces. The questions focused on finding their view on the current situation displays a lack of professional private sector providers, especially for migrant students studying in public universities. There are also well-established educational hubs in Tier 1 and 2 cities in UP, Maharashtra, Rajasthan, among others, hence, emerging as target markets for supply firms. In order to, however, tap into the potential for growth in this industry, it is crucial to focus closely on the demands of the consumers, that is, the students and the overall target audience, in this case the parents. They are now looking for not just a place to live, but a wholesome growth experience for their child. This involves providing innovative solutions like mentorship, learning programs, extended support, partnerships with service providers across sectors (eg. FnB etc.), high quality maintenance, among others, and not just cater to the basic accommodation and safety needs of the consumers.

TSB expects this industry to rebound once the crisis is over, but in a totally new avatar. Going forward, all student accommodation firms would have to strictly adhere to standards of sanitation and hygiene not seen before. Attributes like doctors on campus, mentorship and counselling initiatives, focus on community well-being, etc would start to take centerstage. The student living market of tomorrow is bound to be very different to what it was yesterday, and this would be a positive and welcome change. Moreover, with the new look student accommodations coming up, ideas and best practices from developed western countries would start to be adopted in India. This could be facilitated by a consolidation in this space, with the entry of large players with a high quality and Pan India offering, similar to what firms like WeWork did in the co-working space.

This is not to rule out smaller regional players, who by virtue of being firmly entrenched in their respective zones, could give the larger players a serious run for their money. Competition all around is healthy and would force every firm in this space to up their standards or perish. While cost sensitive, the target audience still represents a reasonably affluent clientele and they would gladly pay for good service.