Education Sector Real Estate Opportunity Estimated at 4 bn sft in India in Next Decade

Hyderabad: The additional real estate demand from India’s education sector is estimated at over 4 billion sft by 2034-35, according to the report ‘Exploring the Intersection of Education and Real Estate in India’ by CBRE South Asia Pvt. Ltd., India’s leading real estate consulting firm. Fuelled by strong fundamentals and proactive policy measures, India’s education sector is forecast to reach a market size of $ 313 billion by 2030, as per industry estimates. Furthermore, student enrolments across K-12 and higher education segments are expected to increase 1.2 times by 2034-35, surpassing 360 million. A combination of these factors is likely to necessitate additional real estate demand.

CBRE India conducted a real estate opportunity assessment to evaluate the additional space requirement of K-12 and higher education institutions that can accommodate the projected growth in student enrolment in India. This data-driven approach utilised historical and current student enrolment figures to establish a baseline for growth projections.

The findings from the same are highlighted below.

Source: CBRE Research Q3 2024

The Indian educational sector is currently valued at $117 billion and is witnessing substantial growth. The K-12 segment plays a crucial role in this dynamic market, serving as the foundational pillar of the educational system. India has an impressive 1.49 million schools fostering K-12 education for its vast population of approximately 265 million school-going children. The country is also home to one of the world's largest higher educational systems, with an estimated 43 million students enrolling across nearly 59,000 institutions.

This is complemented by the fact that 675 million of India's projected urban population by 2035 will need improved access to quality education and better employment opportunities, boding well with the real estate sector, as improved access will ultimately accelerate real estate demand. Rising household spending on education, online learning platforms, and supportive government policies, such as the National Education Policy, can further fuel this expansion.

India's robust fundamentals, including a burgeoning economy, young workforce, increased urbanisation, rising income levels, and the existing gaps in public schooling, have positioned the country as a highly attractive destination for long-term investors. This appeal is evident in the significant growth of private investments and FDI within the education sector. Accounting for just 0.7 per cent of the total FDI inflows in 2019, this figure nearly doubled to approximately 1.4 per cent by 2023. Since April 2000, the education sector has garnered investments worth $9.5 billion in FDI equity inflows, with a notable two-thirds of this investment materialising within the last four years alone, signifying a surge in investor confidence.

The Government, in a clear demonstration of its commitment, has consistently allocated dedicated budgetary resources over the years. In the last ten years, leading institutional investors have also played a pivotal role in fuelling growth within the education segment. This trend coincides with the emergence of the asset-light model, which has presented a compelling opportunity for investors seeking exposure to school infrastructure development.

As far as India's education landscape is concerned, it is diverse and rapidly evolving, spanning from primary to higher education. Significant progress has been made in expanding access, with targeted initiatives to improve enrolment and reduce dropout rates.

The report by CBRE identified specific academic centres with investment potential in different states. This assessment considered a comprehensive evaluation of the concentration and spread of private educational institutions, the demographic potential and receptiveness within these centres, and accessibility, supported by ongoing urbanisation and state and central regulatory policies.

As the education sector evolves, factors such as technology permeation, revamped building designs, and focus on health & safety are likely to define education real estate. Besides, modern educational building design must prioritise flexibility so that spaces can be reconfigured to adapt to various teaching methods and activities, developing a dynamic learning environment. To address this and move away from traditional classroom setups, educational buildings now include collaborative spaces to encourage teamwork and group learning. Moreover, sustainable, and eco-friendly design elements, such as energy-efficient systems and natural lighting, are becoming increasingly common to reduce the environmental impact of educational buildings.

The report also projects further expansion by stakeholders, leading to a spurt in demand for land. As educational institutions seek suitable locations, unlocking potential land demarcated for municipalities across tier-I cities will likely translate to more land acquisitions for setting up schools or colleges. Additionally, aggressive expansion in tier-II and tier-III cities is expected to fuel land demand for new educational infrastructure.

Anshuman Magazine, Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE, said, “As demand for quality educational infrastructure grows, strategic investments will be essential to address future needs. In India, the education sector is undergoing a significant transformation, influenced by the Covid-19 pandemic and the accelerated integration of technology. This shift has fostered innovative educational solutions and new design models. The 'flight-to-quality' trend is impacting various asset classes, prompting schools, colleges, and universities to prioritize flexible, collaborative learning spaces, inclusive design, and health and safety in their building strategies. As the educational landscape evolves, stakeholders must adapt to these trends to shape the future of educational infrastructure in India.”

Rami Kaushal, Managing Director - Consulting & Valuation Services, India, Middle East & Africa, said, "The evolving educational landscape is creating a paradigm shift for the real estate industry. India's large talent pool, coupled with the country's emergence as a global business destination, syncs well with the current trajectory of the real estate sector. Some of the proactive policies undertaken by the government will further fuel demand for quality educational realty assets, boosting the investment ecosystem that has already gained significant momentum."

Methodology & Core Assumptions

The analysis includes all categories of K-12 schools (private, public, etc.) and all categories of universities and colleges (central, state, private, etc.) across the country.

Enrolment numbers across K-12 and higher education segments have been extrapolated based on decadal growth trends (2011-12 to 2021- 22) as per central government’s Unified District Information System for Education (UDISE) and All India Survey of Higher Education (AISHE) reports.

Educational Infrastructure space requirement calculations for both K-12 and higher education institutions are reflective of the academic block area per student considerations. These considerations are derived basis industry best practices and standards.

This is an opportunity assessment exercise, and these projections have been conducted while paying attention to current and historical market trends. While these projections are based on rigorous analysis, it is important to note that market conditions are dynamic and subject to unforeseen fluctuations.