When Josiah Mwangi received his admission letter from Dedan Kimathi University of Technology (DeKUT), he frantically sought accommodation in the neighbourhood but stumbled upon one surprise after another.
Not far from the university, he came across studio apartments (bedsitters) that went for Sh11,000 a month.
Here, two students shared the space, splitting the rent. Single rooms, on the other hand, cost upwards of Sh3,500 a month, not a small amount for a student.
Josiah was lucky to find another block where single rooms went for Sh2,500.
He promptly booked one and went back home to complete preparations for his new academic journey.
“When I returned, however, the caretaker told me that the room was not available. Another student had offered to pay Sh5,000 for the same room,” says Josiah.
In total, the other student parted with Sh10,000, inclusive Sh5,000 one-month deposit.
“Add that to Wi-Fi costs and of course the gadgets one needs to convert the room into a livable space. You need upwards of Sh25,000,” he says.
Josiah had assumed that the university being in Nyeri, where property prices are lower than in Nairobi and other major towns, accommodation would be cheaper.
This is the predicament facing many other students in tertiary institutions. In some far-flung universities, students live in hurriedly erected houses by villagers seeking a quick buck.
At The University of Nairobi (UoN), one of the students’ biggest headaches is successfully applying for accommodation from the Students’ Welfare Authority (SWA).
It is a very competitive process that often leaves many feeling disenfranchised, and leads to excessive “pirating”- students allowing friends and peers who are not allocated rooms to sleep in their spaces, sometimes for a small fee.
As a result, many students who study on the main campus live as far as Rongai and Kasarani on the outskirts of the city.
Those who desire to live closer to the university such as in the Ngara area have to contend with high rents and insecurity.
Cognizant of this, developers have been in a rush to construct student housing, commonly referred to as Purpose Built Student Accommodation (PBSA).
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Just recently, institutional rental housing developer Acorn Holdings Limited (AHL), together with Absa Group and Absa Bank Kenya, announced the successful conclusion of a Sh6.7 billion financing agreement to support the development of 10 more purpose-built student accommodation developments in Nairobi.
Acorn, which is behind Qwetu and Qejani Student Residences, plans to add another 12,000 beds to the Acorn Student Accommodation REITs (Real Estate Investment Trusts) to bring the total bed capacity to 21,000 beds. This will be the largest such portfolio in Africa.
Within three years, these units should be complete as Acorn rushes against time to address the huge deficit of 300,000 beds for students across the country.
In a recent meeting involving investors affiliated with Absa Bank, which was held in partnership with Knight Frank, industry leaders unanimously agreed that student accommodation is among the most promising asset classes for investors in real estate.
“This, alongside investment in county headquarters, could be the future,” said Knight Frank Kenya Chief Executive Mark Dunford.
As the government also aims to build 200,000 houses annually as part of the affordable housing programme started under former President Uhuru Kenyatta’s Big Four agenda in 2017, student accommodation tops the agenda for many developers.
The balance is between making these houses both affordable and decent, according to Lands, Public Works, Housing, and Urban Development Cabinet Secretary Zacharia Mwangi Njeru.
“The government values this partnership, not just because of its fundamental economic benefits but because it also confirms that Kenya’s corporate citizens are building their business plans around our vision,” he said during the Acorn-Absa partnership signing.
Other entities also appreciate the lucrativeness of student accommodation.
State Department for Investments Promotion Principal Secretary Abubakar Hassan urged pension schemes to play a bigger funding role in the affordable housing agenda.
“We have a roadmap to deepen the capital markets through responsive legal and regulatory measures. I would urge the pension schemes to also take part in this affordable housing agenda so that we can support the government’s initiative to mobilise pension capital to support the housing agenda,” he said.
And just last week, Acorn announced a combined net profit of Sh855 million for its Acorn Student Accommodation Income REIT (ASA I-REIT) and the Acorn Student Accommodation Development REIT (ASA D-REIT), together referred to as ASA REITs for the year ended December 2022.
This performance, the developer said, “exhibited the key feature of REITs, which is to provide steady growth and consistent performance, ideal for long-term institutional investors and retail individuals with the mindset for safe wealth accumulation”.
The company also announced a fourth dividend payout by the ASA I-REIT in two years, with shareholders receiving a full-year dividend payout of Sh192.5 million compared to Sh169.6 million in 2021.
Kenya and the rest of Africa continue to experience a rapidly growing youthful population, and the sustained undersupply of formal student housing will only keep on increasing demand and, in turn, the development of purpose-built student accommodation as well as co-living schemes.
Knight Frank’s The Africa Report 2022/23 highlighted the mushrooming of these housing units close to universities, many of them around Nairobi.
“In Kenya, we have seen an increase in purpose-built student accommodation due to the young population, leading to growth in the requirement for quality student accommodation in close proximity to an educational institution,” said Knight Frank boss Mr Dunford.
A collaboration between the government and the private sector could speed up efforts to close this gap and consequently better conditions for students.
Acorn Holdings Ltd Founder and Chief Executive Edward Kirathe said the State Department for Housing had facilitated Acorn’s registration under the affordable housing programme “and is supporting us with the subsequent approvals for the projects we are financing with this facility.”
Construction Kenya in late 2022 quoting Knight Frank noted the purpose-built student accommodation (PBSA) offered a rental yield of eight per cent – “double the returns for prime residential properties in the country.”
“In Kenya, PBSA is proving to have a higher yield (circa 8 per cent) than prime residential properties (circa four per cent),” Knight Frank said in its half-year 2022 market report.