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| Rush for Land in Nyeri for hostels |
Market-determined rates
Currently, an acre is going for about Sh10 million in the area. The huge demand for off-campus accommodation stems from facilities within the University housing less than half of the student population.
Students now have to pay for accomodation at market-determined rates of between Sh7,000 and Sh10,000 per month depending on the number sharing a room.
The higher land prices in the immediate neighbourhood of the university have pushed some investors to develop hostels more than four kilometres away while providing transport to college.
“Some investors have opted to develop hostels farther from the university due to the cost of land here, but they incur additional costs in offering a means of transport to the college,” Kinene said.
More than half the freshmen who joined Kenyatta University under the government-sponsored program this year would have to rely on the private sector players to house them, yet accommodation would be guaranteed for them three years ago.
The numbers are likely to be higher next year as the institution will be taking in more students following a government directive asking the public universities to double their intake.
The housing situation is even more pronounced in private universities which have concentrated their resources on providing tuition while separate entities handle accommodation.
By the year 2000, private sector players had started complementing the accommodation facilities within the public institutions as they started enrolling self-sponsored students, albeit in small numbers that existing facilities could not house.
This set the stage for sharp appreciation of land prices in the vicinity of the institutions as investors stepped in to develop housing to reap from the opportunity occasioned by the deficit.
Some property owners opted to convert their houses from residential to student housing because of the higher returns that commercial accommodation attracts.
Already, more than 10,000 state-sponsored students currently in public universities are living off-campus in private hostels after the government detached their enrolment from the bed capacities in the recent past.
The skyrocketing land prices around universities has been replicated in Athi River in the outskirts of Nairobi where more than four private universities have already identified sites for the development of their premises.
Among the universities that are set to establish their premises in the area include Kampala International, East African and the Hindu University. Daystar University is already established in the Lukenya area.
Ms Bahati Wahenya, a director at Ndatani Enterprises, one of the firms selling land in the Athi River area says that there is an overwhelming demand for land around the proposed institutions that has doubled prices in one year as investors seek to build student accommodation facilities.
The sellers have subdivided the parcels of land into small plots equal to an eighth of an acre to maximize on the selling prices that now range from Sh4.5 million, up from Sh2 million per acre at the beginning of 2009.
“The value of land is fast appreciating because the information available confirms that several private universities will be developing their premises in the area but the plan is that they will let the private sector provide commercial student accommodation,” Ms Wahenya said.
The firm said that the more than 100 parcels of land it had at the beginning of last year in Lukenya area on the Mombasa-Nairobi highway, have all been taken up because of the high demand for accommodation facilities for students of Daystar University.
Housing estates
“It is very difficult to find land around Lukenya at the moment because the parcels that were available until last year have been snapped up by investors seeking to develop accommodation facilities that students can rent,” said Ms Bahati.
New housing estates in gated communities in the area have also spurred the price rallies, as trends in the home ownership sector shift from high-rise apartments to own-compound properties.
Despite the lack of basic infrastructure in the area including piped water and roads, estate developers are increasingly looking at making new developments in the satellite towns around Nairobi due to the cheap cost of land as compared to city estates.
The recent announcement by the Ministry of Education that it would be contracting private entities to enrol students at the government’s cost will add more pressure to the existing accommodation facilities that students reside in.
This means that demand for land to develop student housing facilities will increase as institutions are not likely to venture into the development of their own hostels.
At the prevailing rents, investors who have built hostels around universities would be able to recover the cost of investment in half the time it takes for investments in residential property.
Professionals in the real estate industry say that the average payback period for residential property is between 8 to 12 years, with investments in the high end market having the shortest payback periods going by the average rents for 2009.
At an average monthly rental income of Sh7,000 for a 100-room hostel, the investor will recover costs in less than five years after adjusting for other expenses including electricity and meals.
Mr Daniel Biwott, a property manager says that the high rental income investors are getting from offering student accommodation is attracting many investments to the sub-sector which in turn has a bearing on the price for land in those areas.
“The high demand for accommodation facilities around universities is making the niche attractive to investors since they are able to recover their costs in a shorter time than they would by investing in any other housing sector,” said Mr Biwott.
Despite the high demand for accommodation being the main driver for the high rents that students have to pay, the cost of setting up the infrastructure that includes water, sewerage and roads is increasing costs for developers.
Still suppressed
Mr Biwott says that the above land prices are still suppressed, owing to the lack of basic infrastructure including roads which developers have to construct as part of their construction costs.
Mr Kinene says that developers have to incur additional costs in drilling boreholes to ensure the steady supply of water in their high density residential facilities.
“Most hostels depend on boreholes as their main source of water since there is hardly any piped water in the area, meaning that investors have to incur additional costs in drilling ” he said.
Students pay less than Sh1000 per month in rent for the scarce on-campus accommodation in public universities which is less than 20 per cent of their counterparts residing in the privately owned hostels.
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Hostels coming up near Kimathi University College in Nyeri. Investors are constructing the facility as per the recommendations given by the university to meet standards for the students. Photo/JOSEPH KANYI
Crispus Kinene, the owner of CampusView ladies hostel in Ruiru, is developing a new block of units to meet the rising demand for student accommodation. Hostel rates have become too exorbitant due to the price of land which has risen six-fold over the last two years. He says that the quarter acre on which he developed the ladies’ hostel in 2007 cost him Sh500,000 but now goes for about Sh3 million owing to the high demand for land to be used as student accommodation facilities. “I want to build another block of hostels but the price of land is now too dear due to an influx of investors willing to pay a higher price for the land,” said Mr Kinene. The sky-rocketing land prices around universities has discouraged the development of new hostel facilities and the few who are able to pay the exorbitant prices continue to gain from student rents. The situation in Ruiru has been replicated around the University of Nairobi’s Lower Kabete Campus area where land owners are now unwilling to sell their land hoping to get a higher price. |
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