Why India is an attractive destination for foreign universities to set up for-profit campuses

Foreign universities have the benefit of tapping into a large market size, have future projections and acquire permission to set up ‘for-profit operations’, writes Rohin Kapoor

In just a few years, Indian parents may face the conundrum of choosing between Cambridge, Chandigarh or MIT, Mumbai, for their children’s education. Equivalence of qualifications with alumni benefits, access to top faculty and programmes along with an envious lifelong tag, at a fraction of the cost, are some of the key benefits awaiting Indian students. For foreign universities, some of the major attractions include the market size, future projections, permission to set up ‘for-profit operations’, entering joint ventures (JVs)
to mitigate risks, flexibility in programme offerings, fee structures, faculty recruitment and 100% repatriation.

Liberalisation in the early 1990s set the pace and tone for the growth of the Indian economy. Now, with the opening of the higher education sector for foreign investments, a similar trend is expected to transform the entire landscape. Over the next two decades, the establishment of foreign university campuses in India is anticipated to significantly contribute to realising India’s vision of becoming a developed nation and a leading global human resource provider.

Market growth

India is the second largest higher education market globally, with over 43 million students enrolled, a Gross Enrolment Ratio (GER) of 28%, across 1,200 universities and more than 58,000 colleges and institutions. The Indian government aims to achieve a 50% GER by 2035.

The education sector in India is projected to surpass $300 billion in 2030 from about $200 billion currently, growing at a CAGR of over 7%. The higher education component is expected to contribute about 50% of the total market.

Flexibility and autonomy

In 2023, foreign universities and institutions were permitted to set up for-profit campuses initially at GIFT City and later across the country. As expected, complete flexibility and autonomy have been provided for setting up, offering courses, recruiting faculty, charging fees and repatriating profit.

Making an entry

The regulations permit entry as a fully owned entity or through a JV with an existing higher educational institution (foreign/ Indian) or a strategic investor. No limits have been prescribed on the minimum shareholding of a foreign investor. As land and building constitute the highest expenditure for a physical campus, generally a JV is preferred with a developer or existing academic institution having access to prime infrastructure. This also helps in reducing the upfront cash investment and sharing the risks of entering a new market.

For Indian partners, it translates into a win-win situation as they join hands with the best education brands in a fast-growing large market through a for-profit business model.

Key considerations

The University Grants Commission (UGC) and International Financial Services Centres Authority (at GIFT City) are the key regulators responsible for providing approval. A detailed project report, mandatory documentation, along with projected financial statements, are required at the time of application. 

Most top foreign universities have academic partnerships and student recruitment activities in India. However, setting up a campus requires long-term commitment and careful consideration of the following:

1.Right partner: Identification, due diligence, and favourable terms of partnership are extremely critical for success.

2.Right location: India’s vastness requires identifying an ideal location considering demand, the state government’s support, availability of teachers, affordability, competition and industry accessibility.

3.Effective value proposition: Determining a perfect blend of courses and streams offered at the right cost will ultimately define success for any foreign university campus. Peer review and benchmarking of the target operating model and the standard operating procedure can also yield better results.

Initial success

Australia’s Deakin University is India’s first foreign university campus, located at GIFT City, Gujarat. More than 3,500 expressions of interest have been received for 100 seats in the Master’s Programme in Cybersecurity. The tuition fee for the two-year programmes is about $25,000. This early vindication showcases the demand for top global education in India.

The way forward

India’s demographic dividend translates into the next engine of growth for the higher education sector globally. The English-speaking population, growing middle class with increasing disposable incomes and the spending on education being the top three expenditures of an Indian household make the entire proposition extremely attractive for foreign universities. The action has already started and foreign investment in the sector is expected to grow manifold in the coming years.

Source : Education Times