Student accommodation
Student accommodation
Business Model Description
Deliver real estate development projects focused on creating and operating affordable student housing facilities.
Expected Impact
Enhances access to quality education especially for marginalised communities.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- South Africa: Western Cape
- South Africa: Free State
- South Africa: Gauteng
- South Africa: Eastern Cape
- South Africa: Limpopo
Sector Classification
Education
Development need
South Africa has one of the most unequal school systems in the world. More than three-quarters of children aged 9 cannot read. For each 100 learners starting school, 50-60 will reach Grade 12, 40-50 will pass Grade 12 and only 14 go to University.(1)
Policy priority
The Early Childhood Development (ECD) sector suffers from uneven resource provision - reducing the potential for ECD to enhance returns from later phases of schooling, especially for children from lower socio-economic backgrounds.(2) More adults are attaining upper secondary education yet are less likely to be employed than those with a tertiary degree.(4)
Gender inequalities and marginalization issues
South Africa has made good progress in eliminating gender inequalities relating to access to education, with the ratio of girls enrolled at secondary and tertiary level being greater than that of boys.(16)
Investment opportunities introduction
The education sector's low productivity is contributing to a skills deficit and constraining growth across the national economy.(5) It is a significant factor frustrating the country's commitment to addressing Apartheid's legacy of economic inequality.
Key bottlenecks introduction
Challenges including poor infrastructure and supply of qualified teachers are hampering quality within the basic education system.(1)
Education Infrastructure
Development need
Poor school infrastructure affects the quality of education and is a significant barrier to education, contributing to challenges including irregular attendance, student drop-out and teacher turnover.(1)
Policy priority
The priority is to provide financing (infrastructure and working capital) for learning institutions, such as real estate developments projects for affordable student housing facilities.
Gender inequalities and marginalization issues
Student drop-out becomes a serious problem after Grade 9, and inequality of access is worsened by gender inequality that affects young girls especially. Only 28.5% of young women graduate from tertiary institutions in STEM (science, technology, engineering and mathematics) careers.(15)
Key bottlenecks introduction
Bottlenecks include the cost of land acquisition, potential delays due to rezoning, missing title deeds etc., protracted government procurement processes, supply of bankable projects
Pipeline Opportunity
Student accommodation
Deliver real estate development projects focused on creating and operating affordable student housing facilities.
Business Case
Market Size and Environment
Student accommodation demand for 500,000 beds in the next 5 years.
Demand for new, purpose-built student accommodation is set to top 500,000 beds in the next five years.(18)
Indicative Return
5% - 10%
Estate Living estimates an annual yield of 6% – 10%.(9) Old Mutual Housing Impact Fund South Africa (HIFSA) benchmarks returns at the 3-month Johannesburg Interbank Average Rate (JIBAR) + 4%.(15)
Investment Timeframe
Long Term (10+ years)
Construction-only projects can be completed within a 5-year horizon. However, build-to-operate student accommodation approaches are consistent with medium to long term holding periods. This specialized impact fund expects a 15-year maturity.(13)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Business - Supply Chain Constraints
Capital - CapEx Intensive
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
The number of beds available to most universities is a fraction of the student population. One estimate puts the number of beds required across the higher education sector at 300,000, which limits access to education.(10)
Gender & Marginalisation
Inequality of access is worsened by a gender gap that impacts young girls especially. Only 28.5% of young women graduate from tertiary institutions go into STEM (science, technology, engineering and mathematics) careers.(15)
Expected Development Outcome
Increased numbers of student beds available at affordable prices in proximity to tertiary learning institutions, which create more conducive learning environments
Gender & Marginalisation
Increase women's access to research and STEM (science, technology, engineering and mathematics) focused programs
Primary SDGs addressed
4.3.1 Participation rate of youth and adults in formal and non-formal education and training in the previous 12 months, by sex
4.5.1 Parity indices (female/male, rural/urban, bottom/top wealth quintile and others such as disability status, indigenous peoples and conflict-affected, as data become available) for all education indicators on this list that can be disaggregated
(a) 15-24 years: male - 12% (2017), female - 15.2% (2017); (b) 35-64 years: male - 7.3% (2017), female - 8.7% (2017).(17)
Gender parity index: (a) Tertiary education - 1.257 (2007), 1.421 (2012), 1.393 (2016); (b) Enrolment in tertiary education by population group - Black African: 1.395 (2016), Coloured: 1.636 (2016), Indian/Asian: 1.521 (2016), White: 1.314 (2016). Percentage of 7–18 year olds with disabilities: 89.1% (2017), males: 89.1% (2017), females: 89.0% (2017).(17)
The Action Plan to 2019 - Key priority interventions for the Post-School Education and Training (PSET) system include: provision of a diverse set of training opportunities, especially in STEM (science, technology, engineering and mathematics) subjects; skills development for sustainable livelihoods; entrepreneurial skills development; annual monitoring and reporting on the performance of the PSET system.(14)
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Outcome Risks
Risk for corruption associated with developments or with operations of student accommodation facilities (government accreditations, contracts with higher education institutions etc.) (12)
Impact Risks
Unexpected impact risk: Adverse environmental impact associated with new real estate developments
Impact Classification
What
Provide quality, affordable student housing in proximity to contact learning institutions
Risk
Mid-scale effect. There is existing momentum in student housing and developments are open to a mixture of students, including those from higher socio-economic backgrounds.
Impact Thesis
Enhances access to quality education especially for marginalised communities.
Enabling Environment
Policy Environment
Student Housing Infrastructure Programme: Through this program, the government is actively working to provide 300,000 beds on over 300 university and technical and vocational education and training (TVET) campuses over 10 years.(8)
Financial Environment
Higher Education Act 2015: This Act regulates the provision of on- and off-campus student housing at public universities. Its provisions must be applied at all public universities and university-accredited student housing providers.
Fiscal incentives: There is potential scope to contract to deliver government-commissioned developments through the Student Housing Infrastructure Programme.(8)
Regulatory Environment
Higher Education Act 2015: This Act regulates the provision of on- and off-campus student housing at public universities. Its provisions must be applied at all public universities and university-accredited student housing providers.
Marketplace Participants
Private Sector
STAG African, Respublica, Citiq, SouthPoint, Pulse Urban Properties, Old Mutual Alternative investments, BusinessPartners, WestBrooke Alternative Asset Management
Government
Department of Higher Education and Training
Multilaterals
Development Bank of South Africa, European Union
Non-Profit
26 public universities, 50 technical and vocational education and training (TVET) institutions
Target Locations
South Africa: Western Cape
South Africa: Free State
South Africa: Gauteng
South Africa: Eastern Cape
South Africa: Limpopo
References
- (1) Amnesty International (2020). Broken and Unequal: The State of Education in South Africa.
- (2) Mbarathi, N., Mthembu, M. and Diga, K. (2016), Early Childhood Development and South Africa: A literature review. https://researchspace.ukzn.ac.za/handle/10413/13338
- (3) Ilifa Labantwana and Kago Ya Bana (2018). A plan to achieve Universal Coverage of Early Childhood Development Services by 2030
- (4) Organization for Economic Cooperation and Development (2019). South Africa - overview of the education system.
- (5) International Bank for Reconstruction and Development (2019). South Africa Economic Update: Tertiary Education Enrolments Must Rise.
- (6) Mkhwanazi, N., Makusha, T., Blackie, D., Manderson, L., Hall, K. and Huijbregts, M. (2018). South African Child Gauge-UCT. Negotiating the care of children and support for caregivers.
- (7) The Conversation (2018). Proper child care helps poor working women – and it can boost economies. https://theconversation.com/proper-child-care-helps-poor-working-women-and-it-can-boost-economies-92935
- (8) Parliamentary Monitoring Group (2020). Student Housing Infrastructure Programme (SHIP); with Minister. https://pmg.org.za/committee-meeting/29773/
- (9) Estate Living (2018). Student Accommodation - A Robust Investment Opportunity. https://www.estate-living.co.za/news/student-accommodation-robust-investment-opportunity/
- (10) Payi, B. (2020). Dire shortage of student accommodation could worsen. https://www.iol.co.za/news/south-africa/western-cape/dire-shortage-of-student-accommodation-could-worsen-42389997
- (11) Anderson, A. (2019). Slow growth delays listing of student housing provider. https://respublica.co.za/2019/10/17/slow-growth-delays-listing-of-student-housing-provider/
- (12) Parliamentary Monitoring Group (2020). Student Housing Infrastructure Programme (SHIP); with Minister. https://pmg.org.za/committee-meeting/29773/
- (13) Centre for Affordable Housing Finance in Africa (2019). Housing Investment Landscape South Africa. https://housingfinanceafrica.org/app/uploads/South-Africa-Report-_RSLayout_Final.pdf
- (14) South African Government (2019). South Africa Voluntary National Review: Empowering people and ensuring inclusiveness and equality. https://sustainabledevelopment.un.org/content/documents/23402RSA_Voluntary_National_Review_Report___The_Final_24_July_2019.pdf
- (15) United Nations International Children's Emergency Fund. Education - South Africa. https://www.unicef.org/southafrica/education.
- (16) Verhoef, B. and Perrie, D. (2020). “Affordable Student Housing in South Africa: Business and Funding Risks.” Orbitt Capital (blog). April 7, 2020. https://orbitt.capital/affordable-student-housing-in-south-africa-business-and-funding-risks/
- (17) Statistics South Africa (2019). Sustainable Development Goals: Country Report 2019 - South Africa. http://www.statssa.gov.za/MDG/SDGs_Country_Report_2019_South_Africa.pdf
- (18) Rawson Property Group. Investing in Student Accommodation: Pros and Cons. https://blog.rawson.co.za/the-recent-protests-at-universities-and-colleges-across-sa-have-caused-many-to-question-the-wisdom-of-investing-in-student-accommodation.