The main saboteur is the pattern of investment in real estate – older generation used to buy houses built on plots, where price of the land used to appreciate.
Shaming the idea of older generation to buy a home as early as possible in the city where they used to join an organisation and retire from there, making the city a second hometown, high-flying millennials don’t buy the idea of getting stagnant in same place. Now a days, youngsters not only change companies frequently, but cities and countries too, so maintaining a property in a different city creates unnecessary burden for them once they move out the place.
Not only the fast working life, but the popularity of alternate investment options and growing knowledge about personal finance have exposed the shortcomings of real estate investments, which once considered as the supreme money making option. However, the main saboteur is the pattern of investment in real estate – older generation used to buy houses built on plots, where price of the land used to appreciate, whereas due to scarcity of land, now people buy flats, value of which depreciate on long run due to problems like wear and tear, water seepage etc.
So, after using or holding a flat for about 20 years or more, it may become harder to find a buyer, unless the entire apartment blocks are superbly maintained, which is not entirely in the hands of the flat-owner, but needs strong cooperation of residents and a powerful residential welfare association as well. Still, no one can deny the aging of a depreciating asset.
As a result, millennials prefer to stay on rent, so that there will be no headache of maintenance of property and no burden to move on with fast work life. Such lifestyle makes the rental value of properties spike, while the realty prices slump.
With the spike in rents, the culture of co-living emerged in top cities and increasing number of millennials are lapping up the option in tier 2 cities too. According to a survey conducted by Knight Frank India for its report titled ‘Co-Living – rent a lifestyle’, 72 per cent of millennials (18 – 23 years) have given co-living spaces a thumbs-up and over 55 per cent respondents in the age group of 18 – 35 years are willing to rent co-living spaces.
Following table shows the preferences of the people participated in the survey:
More than a mere bed-and-breakfast deal, people opting for co-living stay in fully-furnished homes where the privacy of tenants is respected. As private bedrooms have access to common shared areas like the kitchen and living room, such spaces offer convenience and an entirely new lifestyle for young professionals – most often bachelors and singles – who are not keen to change cities because of their work.
Following table shows comparison of co-living parameters with other types of accommodations:
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “Co-living aims to create a community-centered living environment that not only provides privacy in living arrangements but also promotes social contact through community spaces and programmes.”
As the survey also observes that close to 40 per cent of all respondents are most comfortable in paying between Rs 10,000 – 15,000 per month towards rental housing in key cities of India, co-living allows them to cut the cost of rent, apart from providing comfort and independence.
“As an asset class, the biggest driving force behind the rising popularity of co-living spaces are young renters moving to new cities who are looking for easy access and reasonably priced rental accommodation,” said Baijal.
Following table shows approximate total pay-out for each type of accommodation in an one-bedroom unit on a per month basis across select locations in Bengaluru:
Not only it is advantageous for the people staying on rent, co-living inventory also presents a lucrative rental income opportunity for developers and owner operators. According to the study, 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. The co-living culture 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.
“The survey conducted by Knight Frank India shows great potential for rental housing in the country. 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,” Baijal further said.