Student Housing: The Next Frontier in Kenya’s Real Estate Market

Over 120,000 young boys and girls are enrolled in a four-year college with 50,000 of those on a full time basis. This measures are set to be historical highs in Kenya according to the ministry of education. The demand for elaborate student housing has never ceased to be a challenge. Most universities in Kenya can only be able to accommodate 20 – 30% of the students admitted with the rest being forced to seek proper housing outside campus.

Combined with National housing shortage, the shortfalls is estimated to be around 200,000 housing units annually with student populations taking about 40% of the shortfall. Looking at those figures, that’s enough proof to propagate a partnership between developers and tertiary institutions.

An innovative business model most universities are introducing is a BOT(Build – Operate – Transfer) business model by partnering with a given developer who puts up housing for students then collects rent for say 20 – 25 years before handing it over to varsity institutions. This became official after most of them were cleared by the government to finance their construction of their hostels through public private partnerships (PPPs)

Student housing construction by PPPs is likely not to keep pace with the demand as more student intake in tertiary institutions is set to increase by 30% year or year according to the ministry of Education. This creates an open field for more developers to participate in the process to bridge the gap before it becomes a national crisis. Here’s what to look out for should you choose to invest in student housing.

Financial

First things first – will it cash flow? Clearly, if it will not cover all your expenses, then it would not make a good buy-and-hold investment. If the property costs KES 3,000,000 then you’d need KES 30,000 a month in rent. Also, start your research on what the students pay for rent

City Regulations

Are student rentals licensed in your city of choice? If so, you’ll need to find out what the stipulations are around number of rooms/students, inspections and fire safety, among other things. The outcome of this will impact your financials as well. For example, if the maximum number of students is four then four multiplied by KES 10,000 per month in rent will give you KES 40,000 in revenue. If you can get five or six rooms, it changes financials significantly.

Demand

This is a no-brainer. Student housing takes 40% of the national housing shortage in Kenya. A lot of National universities are looking for public private partnerships. The demand is there and will be there for a long time.

Property Type

There are a number of property types that aren’t ideal for students. It’s useful to look at the suitability of the available housing. In Kenya, apartments tend to be more suitable compared to townhouses and the likes. Layouts of the rooms, sizes, common areas should be tailored well for student accommodation.

Area

Availability of undeveloped land and proximity to college are two main factors that will determine which area will be most suitable to develop housing units. For example, in Juja area, where Jomo Kenyatta University of Agriculture and technology is situated, there is a lot of prime land around that is suitable for development. Also, the area is abuzz with student amenities, public transit and entertainment joints.

Article courtesy of Lamudi Kenya.