Student lodgings: The new property frontier

Kudzanai Sharara
A growing student population particularly at universities is having a direct impact on the demand for quality and affordable purpose-built student accommodation (PBSA), and property investors are looking at cashing in.

Zimbabwe has 20 universities, 15 teachers’ colleges, eight polytechnics and five industrial colleges, with enrolment of 152 529 students and a staff complement of 18 153.

The provision of quality and affordable PBSA has not kept pace with demand.

Property investors estimate that less than 10 percent of the above numbers can be accommodated on campus residences at present, and the rest resort to renting accommodation privately.

Often these are apartments or share houses close to universities or colleges.

The problem, however, is that this existent alternative accommodation is not purpose-built for learners. As a result, the undersupply of customised student accommodation is attracting both public and investor interest. This interest is furthered by opportune market fundamentals and a relatively favourable investment risk profile in student accommodation.

Government set the ball rolling earlier this year by giving CBZ Holdings the mandate to structure and issue an infrastructure bond of up to US$2 billion for construction of student and staff accommodation for State higher and tertiary education institutions.

Ten financial institutions submitted bids, signalling the huge interest in such projects.

Other players have since joined in as well, with Zimbabwe Stock Exchange-listed Zimre Property Investments and the State-owned Infrastructure Development Bank of Zimbabwe announcing plans to venture into this growth industry.

ZPI is planning to invest US$9,4 million in provision of student accommodation at the National University of Science and Technology, while IDBZ is mobilising US$35 million towards “the first phase of construction of student accommodation at the country’s State universities”.

In 2011 Mr Edson Muvingi, the MD of ZPI, said the firm would divert “its attention from collecting rentals to projects. The company was to focus more on residential stands development than wait to collect rentals.”

For a company known for owning high-rise buildings like Fidelity Life Towers in Harare and Nicoz House in Bulawayo, a shift to residential property development is notable.

Analysts quickly pointed out that the residential did not do ZPI much good at Parklands in Bulawayo and Rhodene in Masvingo, where sales were slow and low. But Mr Muvingi was adamant that this was the way to go: “We think that’s where the money is.”

The results that followed vindicated the decision. By the first quarter of the 2012, there was already a dilution on the contribution of rental income to the group at 57 percent down from 76 percent.

Projects contribution had moved up to 38 percent from 21 percent with Mr Muvingi saying the company could easily declare dividends if the trend was maintained.

Listed entities like Fidelity and ZB Financial Holdings, among others, joined in the fray.

Market saturation

Zimbabwe’s housing backlog is estimated at over 1,2 million units, so there is no fear of market saturation.

Mr Muvingi believes the strategy of providing well-serviced stands with title deeds is a viable option.

“If you look at the houses that we’re building along Airport Road and those at Aspindale Park, you can tell that the owners invested quite a lot of money. What was only lacking is something with title deeds; something legal,” he said.

So why shift towards student accommodation?

At some universities, the introduction of two first-year student intakes — in February and August — has created opportunities as campuses do not have adequate facilities to accommodate the bigger numbers.

“Student housing has not been keeping pace with increases in universities and other institutions of higher learning. So there’s been a huge backlog of undelivered supply. Very few universities are actually building their own dormitories or halls of residence. In fact, almost none are building,” Mr Muvingi said.

“We are working on providing student accommodation for National Science and Technology students where the supply currently stands at 200 beds against an enrolment of 7 000 students.

“Now when you consider where all the other students stay, you will realise that the place might not offer the right learning conditions which put a strain on their studies. So that’s where we are coming in to provide custom-made facilities that are built for student use.”

The student-focused property thrust is not unique to Zimbabwe. CampusKey, which owns residences housing 4 000 students, is planning to list on the Johannesburg Stock Exchange.

Another student property fund will probably beat CampusKey to a listing and become the first provider of student accommodation to come to market.

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