State support can be accessed by those investing in student housing
Choosing to invest in student accommodation, where demand is always high, makes it attractive to those seeking low-risk but respectable returns
SA faces an uncertain future, but one thing is clear: we will need the emerging generation to be empowered with the necessary skills to embrace the Fourth Industrial Revolution (4IR) to enable our industry to be world competitive.
For this to happen, those pursuing higher education require some security so the scarily high dropout rate can be brought down and a new cohort of skilled and confident graduates can emerge.
Housing may seem mundane, but it is vital, and it is exciting that state support can be accessed by those like ourselves who are investing in student housing.
The help comes from the Income Tax Act’s section 12J, which enables taxpayers to deduct the full capital amount of their investment from their income in the tax year the investment is made.
We have already seen keen interest in a student housing project we are involved in. It’s in Braamfontein, an area with a high student population and strong demand for housing to accommodate those thousands of students.
It has been a no-brainer for us to back this initiative to support our most brainy. If students are well-housed they can study better, feel more secure, and hopefully fulfil all our dreams for a better-educated, more diverse workforce.
This is not charity, though. It makes economic sense. The project gives section 12J investors an opportunity to get good returns on their investment, both in financial terms and in terms of investing in our country’s future.
Students are far from being an affluent section of society, but they will be able to pay for their accommodation through the support they receive from the National Student Financial Aid Scheme (Nsfas), which provides study loans to academically able but financially needy students who wish to study at one of SA’s higher education institutions.
The returns are thus ensured, because the students will be paying a regulated rental with the help of the Nsfas subsidy, which is currently up to R4,200 per student, per month. The bursaries are open to students from households with an annual income of less than R350,000, and cover the tuition fees, accommodation and food and travel allowances for these full-time students.
The project has already secured 40% of funding, 10% of which comes from section 12J investors, and work starts in November.
Choosing to invest in student accommodation, where the demand is always going to be there, makes it attractive to those seeking low-risk, but respectable returns. Braamfontein is close to two universities — Wits and the University of Johannesburg — and the district is well-established as a hub for student life.
There is, of course, an opportunity for far more growth in the national student housing market as there is always a shortage of low-cost, affordable housing, especially for student accommodation. We plan to use the model of the Braamfontein project to launch similar ventures elsewhere in SA. There is no shortage of demand.
The Covid-19 pandemic is a concern, but it hasn’t changed the viability of the project. We plan to complete it in June 2022, and the first intake of students will be July. These tenants will be better able to protect themselves from the pandemic when they are housed in clean, secure, uncrowded conditions. It won’t be the Hilton, but it certainly won’t be a slum either. In all, 427 students will be offered accommodation, and will also be provided with free wi-fi and studying facilities — and there will be on-site catering.
One of the saddest developments in recent years is the way in which the centre of Johannesburg — and I include Braamfontein in this — has been able to fall into decline. However, there are numerous initiatives to revitalise the area, to make it safer and more attractive to live there. Our student housing project is but one of those schemes which will help to make this a safer and more pleasant area in which to live.
The project will not only benefit students and investors, but it will bring jobs as well. During construction 150 people will be employed, and post construction there will be 20 direct jobs, as well as 100 indirect jobs for suppliers, property managers and so on. This is but one of the many investment opportunities we have identified as eligible for the 12J tax incentive.
Our student accommodation project is hardly the latest gold mine in the City of Gold. But mining 12J will bring real benefits to investors and students alike.
• Hart is executive chair of Impact Investment Management.
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