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Geetu Vaid
Shared spaces seem to be the success mantra in a slowdown-plagued real estate sector currently. While on the one hand co-working spaces are keeping the office space segment buoyant, in the housing category the trend of co-living is being termed as a virtual goldmine having the potential to be a $93 -billion market in the country soon.
An advanced and more organised version of the paying guest accomodations, co-living is more in sync with the demands of tech-driven millennial workforce and student community in metro cities. The past couple of years have seen the emergence of a number of organised players in this domain, who are offering a complete living experience to young professionals as well as students. At present there are over two dozen established players offering studio apartments as well as rooms on single and shared basis. The facilities being offered include wi fi, laundry services, independent kitchens, gaming consoles, libraries, play areas and even gyms and swimming pools.
The average rental varies between Rs 5,500 to 15,000 depending on the location as well as facilities being offered.
Market drivers
In a scenario where developers are sitting on huge unsold inventories and the home buyers seem to be stuck in the wait-and-watch mode, the demand for rental housing that comes with a slew of high-end facilities can be a game changer for the sector. The paradox of Indian realty sector wherein as many as 9 million houses (Census 2011) are lying vacant while there is an acute shortage of quality housing, too, is a major market driver for co-living rental housing. The ready inventory is being utilised by organised players to give high quality options to millennials, especially in metors like Bengaluru, Chennai, Hyderabad, Mumbai, Pune and Delhi NCR. “The pride of property ownership is not a millennial or Gen-Z thing, though they still want to be part of a community and this is where the concept of co-living was born”, says Suresh Rangarajan K, Founder and CEO at Colive, a Bengaluru-based start-up that is having co-living set ups in several southern states. According to a Knight Frank survey conducted in 8 cities 72 per cent of millennials (18 – 23 years) gave co-living spaces a thumbs-up and over 55 per cent respondents in the age group of 18-35 years were willing to rent co-living spaces.
Huge demand
According to UGC data (2016) over 30.8 m illion students were pursuing higher education in as many as 935 universities and 50,000 affiliated colleges all across the country. Out of these, nearly 12.3 million students were migrants. As per a survey by PropTiger.com, total occupancy recorded in hostels within college campuses across India was only 3.4 million students, leading to a demand-supply mismatch of 8.9 million students.
Similarly, data analysis reveals that in total, India had 37.4 million migrant professionals earning Rs 0-10 lakh in 2018 who have completed their higher education between FY12 to FY16. A majority of these students and young working professionals depend upon unorganised rental options.
Growth potential
But, in spite of the fact that a number of enterprising companies have ventured into this segment, this segment remains largely untapped. Currently, the supply by organised players in co-living is limited to over one lakh beds. “Assuming they earn Rs 1.44 lakh per annum per bed, organised players in this segment are currently generating a combined Rs 1,440 crore ($206 million). “If the existing demand-supply mismatch is fixed, this segment has the potentially to grow into a $93-billion market”, says Ankur Dhawan, Chief Investment Officer, PropTiger.com.
Lucrative returns
It presents a lucrative rental income opportunity for developers/owner operators. A Knight Frank study “Co-Living — rent a lifestyle” maintains that a stable co-living facility generates net yield of approximately 12 per cent, while rental yields from a traditional 1BHK remain at 1.5 – 3 per cent. Data available with PropTiger DataLabs show a property for students in Sector 125, Noida, is expected to give approximately 8-9 per cent rental yield whereas housing for professionals is expected to provide nearly 5-7 per cent rental yield.
“Investors also get tax rebate on housing loan if they take a loan for buying a residential property. The investor can enjoy the benefit of tax rebate, along with rental income, something that is not possible in case of commercial property”, adds Suresh Rangarajan. Co-living further enhances revenue potential as cost of shared spaces such as kitchen and living rooms is amortised over a greater number of bedrooms than in a traditional residential development.
According to Shishir Baijal, Chairman and Managing Director, Knight Frank India, “As more and more organised players enter co-living spaces, these are likely to attract institutional funding, assuring better yields to development and operating companies. This will, therefore, allow funds over time to further diversify their rental yield generating asset portfolios in India beyond office space and retail malls.”
Riding the wave
While NestAway Technologies Pvt Ltd. was the first mover of sorts when it entered this market in 2015, other established names at the moment are RentMyStay, Rentroomi, SimplyGuest and Flathood. Other players such as Stanza Living, Zolo, Placio and CoLive have recently entered this sector and raised funds for expansion.
Lately, OYO Living has also entered the segment, with more than 2,000 beds in Noida, Gurugram, Bengaluru and Pune. WeWork plans to bring WeLive, its serviced-apartment offerings in co-living formats to India, sometime in 2019. StayAbode and CP Developers are planning to build the world's largest co-living project at Whitefield, Bengaluru, with the total capacity of 1,400 people.
The co-living sector has a total untapped demand of approximately 46.3 million beds, out of which 8.9 million is from student housing. It is this demand and gap deficit that has provided a huge window to organised players providing co-living spaces making it a thriving market.
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