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Developers Eye Business from Setup of Foreign Universities

Published & Updated as on - 2010-03-23

Construction companies and real estate developers smell an opportunity when foreign universities are allowed to set up campuses in India. Last Monday, the Union Cabinet okayed the Foreign Educational Institutions (Regulation of Entry and Operation) Bill. Once cleared by the Parliament, it will enable foreign universities to do so. Construction companies like Ahluwalia Contracts expect business to double from the institutional segment once foreign universities start setting up campuses. Ahluwalia has set up university campuses for Amity University across the country and campuses for JK School in Jaipur, and NIFT and NCERT in Delhi.

Shobhit Uppal, deputy managing director, Ahluwalia Contracts, feels these hopes are early but hopes to increase his share of the institutional market once foreign universities do set up campuses. The company also participates in the ongoing expansion of IIT campuses, and will also be eyeing the new Indian School of Business to come up at Mohali, near Chandigarh. More than construction companies, it is some niche developers like HCC and SEZ Sri City who see an opportunity by roping in big institutions in their developments. HCC, which is developing a township called Lavasa near Pune, has roped in Oxford University and Ecole Hoteliere, a premier Swiss hotel management school. Sri City, an SEZ 65 km north-west of Chennai, across the border with Andhra Pradesh, is also trying to rope in big names. The idea: once you have a big name like MIT, you could leverage it to attract others and sell them office, residential, and retail space. Developers could make money on the system they create around the institution.

Soumyajit Roy, Assistant Vice President (marketing), Jones Lang LaSalle Meghraj, said developers realise that education could be a big demand driver. They are focused on creating education clusters, where universities could come up. In the US, there are many ‘knowledge corridors’, such as the area around Boston which has lots of universities, research institutions, and industry-academic linkages. Once you have a university, it fosters research institutions and start-ups. Sri City, with over 5,000 acres, is stressing on education as a driver to attract manufacturing units. It is hoping to leverage Chennai’s positioning as a manufacturing hub. For instance, if you have an engineering industry, you could have a focused research chair devoted to a particular industry, such as logistics or mobile applications, say experts.

Once you have a known university like Oxford or Wharton in your eco-system, it will be easier for a developer to rope in, say, a Google, IBM or Microsoft, which can relate easily to these names. It would allow companies to access research and talent and understand how to work together. ‘‘The whole idea is to brand, give them an incentive to set up base here, and create the right eco-system for it to thrive,’’ said an expert. “Developers who have a land bank outside metros and can provide an environment which is campus-oriented could offer good options for universities,” said M S Jagan, consultant, Sri City. If the bill is cleared by March, he expects at least 10-11 colleges and universities to get into action mode and set up campuses in two to three years. There are 130 foreign institutions who have some kind of alliances with Indian institutions.

Anshuman Magazine, CMD, CB Richard Ellis, however, feels universities are unlikely to rush to set up campuses here. “Universities will be excited about the opportunity but will adopt a wait-and-watch attitude to ensure they don’t take a rash decision,”’ added Roy. There would be 15-16 colleges who would be keen to enter India but would also prefer to partner with local developers rather than buying the land themselves. However, Pranay Vakil, chairman, Knight Frank, said as many of these universities had big balance-sheets, they are unlikely to partner with developers. They would rather seek land from the state or partner with them, which would also take care of connectivity. “It will create opportunities for companies like Larsen and Toubro, architects and project managers on how to create a university at a much lower cost. Technology will become important,” he said.

For instance, Mumbai-based architect firm Somaya & Kalapa Consultants has created a school in Baroda which doesn’t require any air-conditioning. It has managed to keep the construction cost low by opting for a brick structure and avoiding plaster. Ravi Ramu, director, finance, of Puravankara Projects said there could be many deals between developers and universities in the next two-three years but people need to be cautious. ‘‘Setting up universities is not just about acquiring land and building campuses. People will find it difficult to make money in education, as salaries will shoot up,’’ he said. As more seats come up, capitation fees will come down, which will make education less attractive.

Source: Indian Realty News 22/3/10

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