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Investors wake up to Kenya’s student housing opportunity

PHOTO CAPTION: COO Student Factory Africa Limited, Kevin Ndung'u unveils the proposed hostels' project model during the ground breaking ceremony held at Catholic University East Africa on April 21, 2021

By Steve Umidha

A growing number of students enrolling for higher education has provided real estate developers an opportunity to cash in on Kenya’s flourishing student accommodation, as the current supply falls short of demand.

Available figures shows that at present, the student population in universities and vocational centres, stood at 796,000 in 2017/18 and was expected to grow by 15.5 per cent to 919,400 in the 2018/19 academic year, according to Kenya National Bureau of statistics 2019 Economic Survey.

It is estimated that the numbers could increase this year as the universities and college age demographic continues to grow even in the wake of Coronavirus pandemic.

The Kenya Universities and Colleges Central Placement Service (KUCCPS) board estimates that more students who sat this year’s form four national examinations, may surpass the 80,000 students who sat last year’s KCSE examinations for admission to join various universities and colleges.

Kenya’s higher education sector has 52 public, private and constituent university college institutions with a total student population of 769,500, which accounts for 40 per cent of the country’s total housing shortage – representing an annual increase of 20 per cent in newly enrolled students.

The increase in high student enrolment is being attributed to the introduction of the self-sponsored module and the directive issued in 2011 instructing all universities to implement a double intake which has played a major role in the current shortage of accommodation in the universities.

As a result, the move has provided a huge opportunity to private developers who have been building hostels near universities to house learners who cannot find shelter within their campuses.

The concept has seen several colleges in the last five years exploring the Public Private Partnership (PPP) model as a means to solve the housing crisis. Under this model, a developer builds a hostel, operates it for about 20 years to recoup his investment before handing over the facility to the university.

The PPP model, which is increasingly gaining popularity worldwide, is viewed as a favorable avenue for investors to put money into the public education sector to supplement State funding.

Student hostels developer, Student Factory for instance last week broke ground for the construction of a Sh 5Billion property – making it the largest commercial students’ hostels facility in the market.

Student Factory Africa, a consortium of architects, first announced its entry into the Kenyan market in March and has partnered with a Dutch-based private equity company on the project to put up a 4,500-bed student accommodation.

The project will be the largest by a private developer and will surpass a similar concept by Acorn Holdings which has lined up two new projects next to the University of Nairobi’s Chiromo campus that will host about 3,000 students.

Acorn, known for its accommodation brands Qwetu and Qejani, in December last year announced that it will spend part of the Sh4.26 billion green bond resources to erect two properties with one an 18-floor property to host 704 units accommodating 2,112 students.

Speaking during the groundbreaking ceremony, the Chief executive of Student Factory Africa Christopher Osore said that the first phase of the new student hostel in Karen will initially consist of ten five story buildings with the construction planned to last 24 months.

“More than ever before, all the signs point to growth – thanks to the partnership between Student Factory Africa Limited, K.C.C.B., TRACOM and Red Betonbouw. All entities are committed to finalize the construction of the project within 24 months,” said Osore while addressing journalists.

The project is being constructed next to Catholic University of Africa and the hostels will be primarily for students from Catholic University. The cost per student per month will range between USD $100 and $180 depending on the hostel type which has different room typologies.

Osore said that the student hostel initiative – a growing concept in Kenya would go a long way towards meeting the existing huge accommodation demand at the local universities.

So far, however, the number of developments mainly in Nairobi and its environs has been insufficient to cover the shortfall, with many students unable to secure a place at a student residence.

Cytonn investments says that other factors influencing the growth include high rental yields in comparison to other assets, and the sub-sector’s stability even in times of economic downturns.

“In Kenya, the concept is also gradually gaining traction as the demand-supply gap between student accommodation and student enrolment continues to widen every year. We recently saw Acorn listed a green bond that is targeted at funding student housing and has recently discussed the potential for a D-REIT, again targeted at student housing,” it said in its March 2020 report on the sub-sector.

Although some accommodation is owned directly by universities or operated by religious groups, the vast majority is in the hands of private companies according to Alice Mukami – a Nairobi based real estate agent who believes that private entities will continue to lead the charge with government seemingly reluctant to venture in the sub-sector.

“You have seen that interest in the last three or so years particularly from foreign investors,” said Mukami.

 

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