Categories
Guide

Building the OYO for student housing

With solving students’ housing needs a relatively recent phenomenon, companies in the space are still trying out various business models to see which one works best. Stanza, for example, aggregates existing inventory in the market—hostels, paying guest (PG) or large residential spaces—and customizes each property to enforce its standards.

Keeping the housekeeping services ready

These additions range from wi-fi and gym facilities to laundry services, common areas, and dining rooms. The rooms are also more luxurious—replete with beds, study tables, air conditioners, closets—with an on-call housekeeping service to keep them neat and tidy. It takes around 15-30 days for Stanza to retrofit a property. These efforts go a long way in differentiating Stanza from traditional hostels and PG services, which are usually poorly maintained and often lack modern amenities.

Stanza’s Dutta says there are enough good quality properties available in the market. Supply issues only arise, he says, in the crowded suburbs of metro cities like Bengaluru or Mumbai. In these areas, it is difficult to find suitable properties since most are built to accommodate only a few people. When Stanza was setting up one of its campuses in Delhi, for example, it had to lease out four adjacent bungalows to manage a capacity of 200 beds.

Existing hostels and PG setups, on the other hand, make for easier turnarounds. Unable to reform and modernize, hostel owners find Stanza’s proposition hard to resist. Renovated, improved properties with rentals higher than what they traditionally earned. Paris House, for instance, was originally one such hostel.

It’s a similar model to what OYO does with hotels—standardizing them and bring them under its banner—except with a focus on students. It allows Stanza to focus on services and customer acquisition while remaining asset-light. This allows it to scale rapidly, enlisting multiple property owners across cities to quickly expand its presence. In the year ended March 2018, Stanza saw revenues of Rs 1.7 crore ($244,900), but losses of Rs 2.3 crore ($331,400).

Do it yourself

Not everyone is convinced by Stanza’s approach, though. Take property tech firm BuildSupply’s founder, Sameer Nayar, for example. While Dutta believes the market is flush with properties suited to student needs, Nayar thinks the opposite. Nayar also has experience in the student housing industry in the US, having worked for Credit Suisse, which was then lending to student housing properties.

Nayar is referring to PBSAs (Purpose Built Student Accommodation). As the name suggests, PBSA is housing built specifically to suit student needs, not a structure repurposed for student housing. Hostels could be an example of PBSA, but not all hostels are appropriately designed.

According to property consultant Knight Frank’s Global Student Property 2019 report, India is sorely lacking in PBSA. While the report estimated the demand for 8 million PBSA beds in India, only 1.6 million bed spaces are currently available.

Housing Startup

Shobhit Maleta, the founder of the Dehradun-based student housing startup IndeCampus, says that a large part of the supply today is residential inventory. While developers are keen on leasing these because of the returns in student housing, they don’t necessarily make for good hostels. “When you are operating a hostel in a residential building, it is commercial usage. Residential buildings are not designed to take that kind of traffic. Eventually, the system breaks down,” explains Maleta.

Resident Welfare Associations (RWA) can also be a stumbling block, typically opposing commercial activity that could disturb the neighborhood. Both Stanza and OxfordCaps, however, say they haven’t had issues with RWAs, and claim to only take properties once the RWA is on board. Gera says OxfordCaps usually takes an entire block in an apartment to avoid such confrontations.

The lack of clear regulations and guidelines for hostels in many states could also prove to be an issue. There are often no specifications for room size, the specific bed area that students must get, or fees and necessary amenities. Instead, hostels work in a grey zone under a commercial license. Maleta says that the lack of standards and compliance could result in disaster. In the aftermath of a recent fire at a hostel in Delhi’s Janakpuri locality, reports indicate that the hostel had no fire safety equipment and smoke alarms were switched off.