From Classrooms to Campuses: What Real Estate Developers Should Take Note?
What is brewing in the real estate sector? The question often pops up among various investors and developers involved in the reality sector. The usual day starts with sipping coffee on a relaxing chair and browsing newspapers. Developers and investors are always in search of some great avenues to gain a first-mover advantage. Developing residential, commercial, and mixed properties is already in fashion, but now they can expect a great respite to this tedious search. India’s education sector is among those utilities with huge potential for developers to accommodate their big dreams and quenchtheir thirst for more. The Indian education sector has undergone tremendous changes in the past few years with the rising demand for quality education and numerous government-led initiatives. Even the pandemic crisis turned out to be a real game-changing event that fueled the growth of edtech ventures manifold and supported the economy and various sectors alike.
Similarly, a new trend in the real estate sector awaits to welcome the developers, where the education sector plays the role of a catalyst to transcend development to the next level.
A welcoming note to the developers: According to a recent report by the global property consultancy firm CBRE, the Indian education sector will require more than 4 billion square feet of real estate by 2034–35 to expand its business. This massive demand requires robust infrastructural development that will bring great opportunity to the real estate and education sectors. Moreover, it will also help to shape the country’s urban landscape for years to come.
The key drivers of growth in the education sector: It is not a coincidence that surging demand for educational institution infrastructure is fanning the growth of real estate; rather, there are numerous factors behind it. Soaring student enrollments, growing urbanization, industrial needs, government policies, and expansion of educational facilities are some of the crucial factors driving this growth.
Rising numbers of student enrollments: An impressive growth rate in student enrollment has been recorded. Moreover, the enrollment is not just confined to the K-12 level (from kindergarten to class 12th grade) but in higher education as well. As per the CBRE report, enrollment is expected to grow almost 1.2 times across all these levels of education by 2034–35, which accounts for more than 360 million to reach by that time. To address such unprecedented growth in student enrollment will naturally require significant development of schools and colleges. To prepare such infrastructure, developers require additional land, modern facilities, and advanced technological integration.
A strong foundation for growth: India, being the largest and most diverse education system in the world, is home to more than 1.49 million schools. That serves almost 265 million students of K-12 standards. Similarly, there are nearly 43 million students enrolled in more than 59,000 institutions for higher education. These institutions provide a robust foundation for potential growth. However, the rising number of enrollments puts an additional burden on the infrastructure and thus requires capacity building through significant investment in infrastructure building.
Urbanization and Government Initiatives: Rapidly growing urbanization is yet another prominent factor propelling the demand for educational institutions. India’s population is expected to reach 675 million by 2035, which will require the development of high-quality education institutions in urban areas. This brings a great opportunity for developers to build high-end, state-of-the-art educational campuses for cities and outskirts. Similarly, the government’s National Education Policy (NEP), introduced in 2020, encourages rendering quality education to students, which also requires building new schools and colleges. Moreover, the government’s focus on promoting private investment in the education sector will also require the development of more and more vocational institutions, private schools, and colleges.
The need for new-age infrastructure: Indian real estate is experiencing a new trend. Various reports and data show that traditional development patterns are no longer attracting buyers, and they are expecting novelty in them. Ecofriendly infrastructure, green energy solutions, sustainability, and a quality lifestyle are the most important things that a buyer expects from the developers. Similarly, the education sector is evolving at a faster pace where traditional classrooms and facilities are gone by. And required a more dynamic and flexible learning environment with ample room for the diverse needs of students and educators.
Greater leverage on health and safety concerns: Since the post-pandemic phenomenon, health and safety have become the most prominent area for institutions and students as well. In fact, in most of the cities, air quality, hygiene, safety, and security are considered some of the most crucial parts of service. Advanced air filtration, touchless technologies, monitoring, and a safe and conducive environment are now considered basic amenities that an institution must have.
Need for flexible design with technical integration: With the changing education environments, institutions are not merely looking for modern facilities but adaptable and adjustable as per the requirement. Since most urban cities space, its cost plays a vital role in expansion, growth, and sustainability. Therefore, space management with technical integration involves building versatile spaces that offer interactive digital learning and flexible design. Institutions are being designed to serve multiple functions and can be transformed into auditoriums, classrooms, seminar halls, and collaborative workspaces as per the requirement.
Sustainability, the utmost priority: Like other property solutions, educational institutions are also showing great interest in sustainable property options. The new age of infrastructure demands eco-friendly construction practices, materials, and infrastructure that consist of rainwater harvesting, energy-efficient systems, solar panels, and the usage of sustainable materials. This does not only help to reduce operational costs but also aligns with global trends.
Challenges and opportunities: With growing demand for expansion and growth come new challenges and opportunities for the developers. Whether it’s establishing a new setup or upgrading the existing one, Indian educational institutions require ample space to meet their requirements. Land acquisition and availability are two of the most crucial factors in it. Some of the cities have very limited land availability and other concerns that are also pushing developers to manage the land acquisition and present new avenues toward Tier-2 and Tier-3 cities.
Land acquisition in Tier-1 cities: In most of the metropolitan cities, the designated land for institutional development is already utilized. As a reason, it is a big challenge for developers to find fresh lands for development. However, there are several places where unutilized land is available or redevelopment work can be done to make good use of it. Effective communication and rapport building with municipal corporations and government agencies can help the developers establish new developments in such places and areas.
Prospect in Tier-2 and Tier-3 cities: As mentioned above, limited land availability in Tier-1 cities prompted developers and institutions to move to relatively small cities for growth and expansion. Cost advantage is yet another factor that plays an important role in development. Relatively lower land prices and growth in various small cities are emerging as a new home to the institutions. Such cities are also having the potential to experience multifold growth from such development.
Investment potential in educational real estate: Investors' confidence in educational real estate is gaining importance. Since this presents dual industry leverage and is more resilient to market fluctuation, it is being considered as a more profitable option for growth. According to the CBRE report, foreign direct investment (FDI) in the education sector has nearly doubled from 0.7% in 2019 to 1.4% in 2023, which is further expected to grow at a rapid rate. Investors are attracted to new asset classes that can offer long-term capital appreciation, regular cash flow through rentalincome, and low vacancy rates. As a result, the need for high-quality education spaces is increasing in urban and semi-urban areas.
Conclusion: India's growth story not only attracts investors but also prepares a vast canvas of opportunities in diverse sectors. The education sector is one of the prominent sectors that provides new avenues for their hopes. Various stakeholders, such as policymakers, investors, and developers, can take advantage of this opportunity and capitalize on their long-term growth for years. Moreover, it will also shape the new India’s urban development and economy by providing growth opportunities to create a world-class education system.