Student housing is still a new investment frontier in Nigeria but, increasingly, especially in the last couple of years, it has been gaining traction, as much private capital has gone into that space, driving development, tapping the opportunities it offers and creating jobs across real estate value chain.
With 70 percent of Nigeria’s growing college population seeking alternative accommodation outside poor campus hostels, the country’s student housing industry is a goldmine waiting to be tapped.
The increase in student population is a reflection of the national population growth which, as at October 31,2018, according to United Nations estimates, was 197.4 million—an equivalent of 2.5 percent of the total world population. The country’s annual growth rate is estimated at 2.6 percent.
According to UNESCO, there are over 100million young adults studying courses in Polytechnics, Universities, and Colleges of Education across Africa and out of which 15 million are in Nigeria.
Checks by BusinessDay shows that Nigeria’s already dilapidated on-campus hostels are able to provide accommodation for only 30 percent of the university students whose annual enrolment rate stands at 12 percent.
“Hostels for students are an opportunity that is crying for investment and if a developer has an understanding with an institution, it is a worthwhile investment,” Rotimi Akindipe, MD/CEO of Groveworld Realties, a Lagos-based real estate development company, told BusinessDay.
This was affirmed by Godwin Asuelimen, Head, Core Product, Propertypro.ng as he said investment in student hostel is very viable, especially in areas with high number of tertiary institutions.
“It is a booming market and something that is growing at the moment. You see a lot of people investing, especially off-campus. It has been higher in areas that have booming student population like Lagos, Benin, Enugu and Port-Harcourt,” Asuelimen said.
Uzo Oshogwe, CEO, Afriland Properties, a property management, investment and development company, agrees, saying that the structured, private off-campus investment model is catching on gradually.
Afriland is into student housing and is presently perfecting plans to partner with the authorities of the University of Lagos to provide hostel accommodation for the students of the institution on build, operate and transfer (BOT) arrangement.
Joel Amawhe, CEO, myPadi.ng, an online housing marketplace that connects college students with landlords for the purpose of making renting and house hunting easier, also affirms that investment in school hostel “is very lucrative and the interesting part is that it brings in more return than the regular buy-to-let properties, because there is more certainty of vacancy than the regular tenant property.”
Student Accommod8 is a relatively young company that opened for business four years ago. The company is quite bullish in providing students hostels. It has already provided over 400 beds across three sites with plans to start construction on 2,500 beds across five sites. Expectation is that in the next five years, the company shall have provided 8,000 beds which, it says, is just a scratch of the surface.
“This investment asset gives about 22 percent returns which is more than double what commercial real estate gives, not to talk of residential real estate which gives 4-5 percent returns per annum. For this reason, we are encouraging other developers to come in”, Abayomi Onasanya, Founder/CEO of Student Accommod8, told BusinessDay in interview.
The company’s latest development is Cedar House, a N350 million facility comprising 140 beds situated in Pan Atlantic University (PAU) campus along Lekki-Epe Expressway, Lagos.
Apart from the good lifestyle living experience it offers, Cedar House also offers fees which Omotoyosi Belgore, the company’s chief operating officer, says is quite competitive at N850,000 per annum for single bed space; N700,000 for a double bed space, and N580,000 per student for a room with four bed spaces.
Amawhe affirms that students are spending, on the average, about $1000 every year on hostel fee and, specifically in Lagos, students spend about $300- $360 for a bed space per annum, that is, for the ones that are semi-furnished. “For fully furnished, you will see hostels that go for as high as N700,000-N850,000 per year,” he added.
Oshogwe noted that student housing was a viable long term investment if an investor gets his or her parameters right. This means that the investment is, however, not without its challenges. “Student housing has not reached full potential. The constraints such as high cost of construction due to lack of cheap funds; expensive quality building materials, high cost of perfecting land titles, building approval and the length of time it takes to secure same, etc, have impeded growth,” Oshogwe said.
According to her, “some federal universities are offering land to private investors and developers on a build, operate and transfer (BOT) arrangement. However, the 25 years or less lease period for the BOT arrangement is not sufficient to allow for a healthy return on investment (ROI) that, at least, exceeds the treasury bill rates.”
The lack of enough bed-spaces to accommodate the millions of students in Nigerian colleges doesn’t come as a surprise as Education funding in Nigeria has been on a steady decline from 12.46 percent in 2015 to 7.04 percent of the total Federal Government budget in 2018, as compiled by BudgIT, a civic startup that liberates budgets and public data.
Commenting to government budget for education sectors, Amawhe said there is a huge deficit problem, as schools are not able to build enough hostels for reasons of lack of capital. “You have very little coming from the government to schools and a lot of these schools are not really making much from their Internally Generated Revenue (IGR); this means the universities are heavily reliant on government, and alumni associations for funds; if you go round some universities you will be shocked at the deplorable state of even the available hostels that they have,” he noted.
BusinessDay checks revealed that lack of enough off-campus student hostels also affects the business of housing agents as they are most of the time unable to find desirable hostels for students.
An estate agent who introduced himself simply as Jerry with an office in the Akoka area of the University of Lagos, noted, “sometimes it pains me that, I have clients who are looking for hostels and after going round and calling most of my colleagues we still end up not seeing a cheap and neat hostel for them”.
This means that opportunities in this segment of the real estate sector is limitless and present a good haven for private investors with strong yield appetite.
CHUKA UROKO, OKAFOR ENDURANCE AND TEMITAYO AYETOTO
