Softbank-backed Oyo Hotels and Homes, through its managed housing brand Oyo Life, announced Thursday a tie-up with IIT-Delhi to provide off-campus accommodation and another deal with the private Plaksha University
With just about one-fifth of the demand for student accommodation being met by organised university-operated facilities, private equity and venture capital firms are cashing in on the investment potential in this relatively untapped segment.
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Softbank-backed Oyo Hotels and Homes, through its managed housing brand Oyo Life, announced Thursday a tie-up with IIT-Delhi to provide off-campus accommodation and another deal with the private Plaksha University (for its fellowship program in Gurgaon), under which Oyo will cumulatively provide and manage over 500 beds for students of the two academic institutions.
This comes on the back of another big deal, where Oyo, alongside Goldman Sachs and HDFC-backed Good Host Spaces, as well as alternative assets fund Blackstone, is also in the race to take over the student hostel assets of Punjab-based Lovely Professional University (LPU) — projected to be chartbuster deal in the segment.
The deal, in which the University’s promoters, the Mittal family, are learnt to be monetising their assets, is being valued at upwards of $175
million (Rs 1,242.5 crore) — conservative if benchmarked to the typical deal ticket-sizes seen in PE transactions, but fairly substantial if one were to consider that so far in 2019, only $117 million (Rs 830.7 crore) has been invested in the student accommodation market in India.
he current demand for student accommodation, or Purpose Built Student Accommodation, in India is pegged at around 8 million bed spaces, which is expected to grow at 8 per cent annually to 13 million beds by 2025, according to the Global Student Property 2019 Report by Knight Frank. Only 20 per cent of the current demand of 8 million bed spaces is currently being met by university-operated provisions in the country.
An overlapping area of interest includes co-working and co-living accommodation spaces aimed at students and young working professionals, an area where investors have started putting money into over the last 24 months.
Stanza Living, funded by investors like Sequoia Capital, Accel Partners and others, has a pan-India co-living inventory of over 20,000 beds and last year, Hamstede Living, a venture backed by Warburg Pincus and Lemon Tree Hotels, is also active in the service accommodation space for students and young working professionals. Co-living startups such as Zolo, and CoHo are among the other start-ups active in this space.
As per data provided by Venture Intelligence, $567 million (Rs 4,025 crore) has been invested by PEs and VC funds in student accommodation companies in 23 deals since 2015. This excludes investment in Oyo, which also operates in other hospitality segments as well. 2018 saw the highest investment activity in the space with $314 million being pumped in through seven deals. The year’s biggest deal involved the $288 million in Hamstede Living.
he proposed LPU deal, according to sources, could help the private university build a corpus to invest in other aspects of the academic institution’s growth. LPU did not respond to an e-mail query sent by The Indian Express seeking details of the potential sale.
A report released by Student Accommodation Provider Association of India and real-estate firm CBRE Thursday said that the student housing space is expected to witness investment worth $700 million and an addition of 6 lakh beds by 2023 across the country.
According to the Knight Frank report, among cities, Bengaluru, which has the highest concentration of university colleges in India, sees only 10 per cent of the demand for purpose-built student accommodation – 3,06,377 students – being covered by on-campus provisions.
This is followed by Pune with 1,91,937 students needing accommodation and 11 per cent of these being covered by on-campus facilities. Bengaluru-based accommodation company Nestaway recently announced the launch of a subsidiary – Hello World – that will focus on co-living and student housing. Hello World, which is present in 15 cities such as Bengaluru, Hyderabad, Delhi-NCR, Pune, Kota, Dehradun, etc and has 10,000 beds, plans to launch in nine more cities across the country in the next 2-3 months and aims to reach 50,000 beds in the next year. The firm said that it leases out an entire building to develop purpose-built rental housing.
Similar to Nestaway, Oyo operates its purpose-built student accommodation business under the brand Oyo Life, which since its launch in October 2018, has managed to expand its presence in 500 buildings with 25,000 beds in Delhi-NCR, Pune and Bengaluru.
“We are rapidly expanding our base to four more cities – Hyderabad, Chennai, Kolkata and Mumbai. Overall, we have set an ambitious target of 100,000 beds in India by the end of 2019 with an aim to become the largest and most preferred player in the co-living segment,” an Oyo spokesperson told The Indian Express.
We are seeing the potential for customers across various stages of life ranging from students, couples right up to families and senior citizens across diverse income groups, opting for such fully managed accommodations. For example, about 20 to 30 per cent of the guests at OYO LIFE across the country are students.”
