Realistic Realtors Foray into Recession Proof Education

The real estate sector in India, like worldwide, is reeling under liquidity crunch borne out of overall economic slowdown, increasing debt & lowering demand and an over cautious lending institutions. While some of the realty companies seem to have resigned to distress selling, there are a few realistic realtors in the country who are smartly turning this adversity into opportunity. These are the players who are diversifying so that the show goes on irrespective of the slowdown.
Some of the biggies of real estate are divesting non core businesses like the telecom which has further deepened the hole in the pocket. However, a clutch of mid-level developers have of late shown the way to their big brothers. These are the realtors who have realised that there is a safe haven which is also recession proof and hence are chalking up plans to invest in the education sector. In the last one month, four real estate developers have announced plans of setting up business schools across the country with the combined investment exceeding Rs 500 crore.
But the fifth realtor whose foray into the “business of education” has set a differentiator is the Delhi-based company AEZ Group. The Group has diversified into education with a 50 per cent stake in Mother’s Pride, the pre-school chain in north India which has been valued at Rs. 1000 crore. Now that is a huge investment and alone accounts for all the real estate investment in education. Mother’s Pride, which runs 26 schools across the National Capital Region has annual revenue of nearly 100 crore per annum.

AEZ Group plans to invest in another Rs. 500 crore over the next five years for the expansion of the joint venture. In the endeavour to catch pace with the growth plan in this emerging sector, the Group plans to add 100 branches across India over the next three to five years. The chain has 14,000 students on its roll and plans to have close to 1,00,000 students on board over the next five years. The school chain is also eyeing oversees expansion although plans have not been finalized as yet. The joint venture is also planning to have a new chain of schools, Sparsh which will cater to the physically and mentally challenged children.

The model has worked successfully in some countries like US and Canada. With diminished demand for housing and a cash constraint, it’s a natural progression for many developers with available land banks. The Chennai based R. R Industries, Ahmedabad based Omega Realty, Delhi based Ansal Plaza and Kolhapur based Sanjay Ghodawat group are the realtors all set to take a plunge in this lucrative sector. They feel that this is the right sector for investment which is upbeat, risk free and where revenue is growing at more than 50 per cent across the industry.
Ansal API also plans to invest Rs 200 crore in next three to five years for setting up private schools, engineering institute across various centre in the country. The group has already tied up with e-learning service provider Educomp and has leased out its three operational schools in Gurgaon to Educomp. The realty major also plans to build school in townships being developed by them.
Similarly, the Ahmedabad based Omega Realty plans to get into business schools - to be named as United World School of Business - with a proposed investment of Rs 105 crores. The three proposed schools in Mumbai, Delhi and Ahmedabad will commence operations in academic session 2009-10. Another builder to jump into the education bandwagon, the Kolhapur based Sanjay Godhawat Group plans to offer courses in engineering, management and also in the pipeline is an international school. The development of the 150 acre Sanjay Godhawat Institute will happen in three phases with an investment of over Rs 250 crore.
The trend seems to have a pan-India outlook and is now being seen amongst the builders in south too. Chennai based real estate firm R. R Industries has tied up with National Management School (NMS) which is being set-up by US academics to start 25 business schools across the country with an estimated cost of Rs 9 crore.
Experts say the reason for the rush into education is the burgeoning demand supply gap and also a logical extension into an adjacent category for builders who have the necessary wherewithal. High rate of returns on investment coupled with huge imbalance in demand supply is attracting real estate players towards the sector who will be at ease in setting up the required infrastructure who already have land banks with them.
However, the diversification won’t be an easy one, as similar initiatives have flopped in China. Among the realtors who have thus far announced their foray into education, only AEZ Group has announced to take the quality Indian education forward to the international platform. Now that certainly sounds like an attractive proposition.