Siya Jele, Portfolio Manager at TUHF
Student accommodation – or the lack of it – has regularly made headlines in South Africa. The shortfall is estimated at around 500 000 beds, and protests at institutions such as the University of Johannesburg, Wits, UCT and CPUT have highlighted the urgency of the crisis.
There is a clear need for decent, affordable accommodation near universities and TVET colleges. But for property entrepreneurs, success depends on striking the right balance between affordability, quality and cost management.
“The financial considerations for a student accommodation project are similar to any other affordable housing development,” says Siya Jele, Portfolio Manager at TUHF. “But understanding the ancillary costs specific to students is crucial.”
Utilities and Wi-Fi, for example, must be built into the rent, as landlords cannot bill students individually. In some cases, transport to campus also needs to be included. “You can’t simply charge a bus fare,” Jele notes. “The shuttle costs must be covered within your per-bed rate.”
Students are discerning tenants. Dormitory-style designs are no longer appealing, with students preferring units that offer private bathrooms and kitchenettes, shared by only a few peers. Reliable Wi-Fi is also non-negotiable. “If it’s slow, they’ll leave – and word spreads quickly,” Jele warns.
These requirements drive up operating costs. While a normal block of flats may have a cost-to-income ratio of 30–35%, student accommodation can reach 50%. In many respects, Jele says, the sector is closer to hospitality than residential housing. Still, profit margins remain strong for well-managed projects: “You have to put in more to get more out.”
Some TUHF clients are reducing costs through smart building management. Examples include motion-sensor lighting in common areas, heat pumps instead of geysers, and low-flow water fittings. One landlord even linked lights and plugs to student access cards, ensuring power switches off when they leave their rooms – similar to hotels.
Despite good returns, risks are higher too. One of the biggest challenges is cash flow. Student accommodation is only occupied for 10 months of the year, and many landlords depend heavily on NSFAS payments. However, late or inconsistent payments – whether directly from NSFAS or via universities – have created major strain. “NSFAS is the biggest risk to the sector right now,” Jele says. “We’ve seen clients go months without payment, yet they still need to maintain their facilities. A disproportionate volume of TUHF’s impaired loans are linked to student housing.”
Yet NSFAS could also unlock growth. While most investment has focused on housing near traditional universities, this market may soon be saturated. Meanwhile, TVET colleges face equally severe shortages but attract little developer attention. “If NSFAS resolved its funding challenges and supported vocational students, the potential is enormous,” Jele says.
For TUHF, the challenge is balancing opportunity with risk. Success depends on NSFAS’ ability to execute its mandate and universities’ capacity to administer student housing. For savvy entrepreneurs, however, well-managed, high-quality student accommodation remains a promising and impactful business.
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