20% Drop in Student Housing Sector Capacity

20% Drop in Student Housing Sector Capacity
19/08/2020 , by , in News/Views

The student housing sector may witness a 15-20 per cent capacity reduction gue to COVID, according to advisory firm EY. Student housing operators are also likely to change their business strategy and transform into seeking more B2B (business-to-business) opportunities.

“The current situation of COVID-19 has resulted in major changes, affecting all four stakeholders including colleges and educational institutions, students, asset owners and the student housing providers. Also, due to social distancing norms, capacity reduction of 10-15 per cent is expected,” the report said.

The sector’s B2C (business-to-customer)-based inventory is the most impacted, as student rentals were charged on a monthly basis, it said noting that two months of security deposit paid by students have helped them avoid revenue shortfall until June 2020.

Institutional operators or players having management contracts for operating university hostels are the least impacted on the back of secured revenues. However, in both scenarios, risk of students demanding refunds may re-orient the current ease. The agency further said the student housing sector might undergo significant consolidation.

In addition, for active operators, business strategy may transform into seeking more B2B opportunities with universities and revenue share model with facility owners to mitigate future risk. The real estate segment of the higher education market, which depends primarily on around 10 million migrant students at key education hubs in India, is expected to take a few months longer to re-bounce compared to other segments in this sector. This is because institutes would need to maintain precautions and interstate travel would continue to be a challenge.

 

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