India’s New Education Policy to boost construction of educational institutes

India’s New Education Policy objective to increase enrollment and excellence implies more educational institutions and real estate opportunities

January 14, 2021

India’s 1.56 million schools provide education to around 250 million children as of FY 2018-19 and form the foundation of the nation’s progress. The higher education system, the next step for specialised skill-building, has enrolled an estimated 37 million students in over 40,000 colleges during the same period.

The newly reformed education system 

As India continues to grow, these educational institutions are assuming a greater role. As such, the New Education Policy (NEP) was enacted to provide universal pre-primary education and foundational literacy to all by 2025. Higher education will also undergo a sea change by doing away with multiple regulators who have overlapping mandates and the centralised decision-making system.

The NEP 2020 will allow foreign universities to set up offshore campuses in India. This will help save significant amounts spent on overseas education and raise higher education standards in the country.

Brick and mortar of education

The education sector reforms should go hand in hand with required infrastructure such as school and college campuses, universities, student accommodation, and research institutions. This would require real estate investments across the education system to ensure sustained growth.

Private schools to improve primary and secondary education

The trend in primary and secondary schools indicates that private schools' share has been increasing steadily over the years. The total number of private schools  increased by 37,600 between FY 2014-15 and FY 2018-19. Parents' preference for private schools can explain the rise in private schools due to emphasis on quality education, trained and qualified teachers, extra-curricular activities, and use of modern educational tools and better facilities.

Figure 1: Increasing share of private schools at primary and secondary levels (Standard I-VIII)

Source: Unified District Information System for Education, Ministry of Human Resource Development, Government of India

Demand for higher educational institutes to increase sharply

Enrolment in higher education has increased by 3.2 million students between FY 2014-15 and FY 2018-19, registering a compounded annual growth rate of 2.3%. During the five years, the number of colleges grew by almost 1,400, underlying the need for setting up new colleges with increasing enrolment. As the NEP aims to increase the gross enrolment ratio1 from 26.3% in 2018 to 50% by 2035, the average enrolment of 0.6 million students will rise sharply, leading to higher addition of colleges than the current rate. The setting up of colleges would create new real estate construction opportunities and alternative assets for investors.

Gross Enrolment ratio1 is defined as total number of students enrolled in a given level of education, regardless of age. It is expressed as percentage of the official school age population relative to the population of the age group which officially corresponds to the given level of education.

Figure 2: Rising student enrolment and gross enrolment ratio in higher education

Source: Ministry of human resource development, Department of higher education, India

The increase in colleges, mostly concentrated in metros and tier-2 cities will also lead to migration for higher studies and demand for student housing. Indian college campuses typically fulfil 25-30% of their total student housing demand. This presents an off-campus housing demand for close to 1 million migrant students (aged 18-23) across the top seven cities, which can translate into a significant business opportunity for organised co-living players.

Figure 3: Supply constraints in universities spell further opportunity for co-living

Source: JLL Research

India’s education system reform has created sizeable opportunities for real estate in the construction of schools, colleges, student housing, co-living, etc, and we expect that there will be good traction in times to come.