Letting a flat on a college road: the market nobody models

Somebody buying to let in Kharadi is buying into an IT employment market. The tenant is a salaried professional, the lease is eleven months, and it renews because moving is annoying.

Sinhagad Road is not that market, and applying that model here produces a number that will not survive contact with a second year.

Who the tenant actually is

On much of this corridor the marginal tenant is a student or a group of students, or a young professional sharing with two others. That is what a large college population does to a rental market, and this corridor has Sinhgad Institutes, Bharati Vidyapeeth and JSPM on it.

There is a family market too, drawn by the schools and the hospitals. It is steadier and it pays less per bedroom. Most owners end up choosing between the two rather than getting both.

The three ways the arithmetic differs

1. The year has a hole in it

An academic tenancy runs to an academic calendar. Turnover clusters, the vacation empties a proportion of the stock, and a flat vacated in April may not re-let until June.

If you model twelve months of rent you are overstating the income. Ten is a more honest starting point on a student let, and eleven on a family one.

2. Furnishing is not optional

Student and sharing tenants expect a furnished flat. That is capital you spend before the first rupee of rent, and it depreciates on a three to five year cycle with more wear than a family tenancy puts on it.

3. You are competing with professionals

Purpose-built paying guest accommodation and branded student housing are established all over this corridor. They are furnished, serviced, include food, and are marketed directly to parents.

A private two-bedroom flat competes with that on space, privacy and cooking, not on price. Knowing which of those you are selling changes how you fit the flat out.

What Skydove specifically would change

Two things, if it is built as described.

A thousand-home scheme with a clubhouse, a pool and shops on site is a different rental product from an ageing four-storey building near a campus gate. It targets the family market and the senior-professional market rather than the student one, and it should let accordingly.

It also adds a lot of supply to one location at once. Eleven towers completing over a few years puts a large number of similar flats onto the same market in the same window. Anybody modelling rent on today’s corridor figures should think about that.

What cannot be modelled yet

Yield, because yield needs a price, and no price has been announced for this project.

It would be straightforward to take a corridor rate, apply an assumed area and publish a yield percentage. Several sites do. The result would be our arithmetic presented as the developer’s pricing, which is the thing the piece on rates exists to warn about.

What to work out before you buy to let

1. Which tenant you are targeting, and furnish for that one.
2. Ten months of rent, not twelve, until you have your own evidence.
3. Maintenance charge, property tax and society transfer costs, subtracted before yield.
4. Whether the society permits letting to sharing tenants at all. Many restrict it.
5. How much comparable supply completes in the same eighteen months.

That last one is the discipline most buy-to-let arithmetic skips, and on an eleven-tower scheme it is the one that matters most.