The evolving pandemic and lockdown have momentarily slowed down operations as well as begun to question our way of functioning across various segments and co-living is no different.
Our home, our abode, our house – the criteria influencing decisions on this very important aspect of our life keeps changing and updating over the years. The key variables impacting this change include the trends in the economy, work and culture. The digital and startup trend brought in the concept of shared spaces and thus began the era of co-working, co-living etc. eventually redefining the overall landscape of the commercial and residential segment. ‘Co-living’ as a concept hit off in the western countries in the early 2000s when young urban professionals working primarily in the technology sector or startups, leased rooms within shared houses leading to the so-called ‘hacker spaces’, which allowed them to reduce costs by sharing space and facilities.
At 440 million, India is home to the largest millennial population globally in absolute terms, with millennials comprising 34% of the country’s total population. Migrant bachelors have for long been used to taking up space in rented accommodation on a sharing basis or staying as paying guests, etc. However, the process of renting, spaces offered or options to choose from, have been scattered and unorganized. This paved the way for a more organized and professionally managed system termed as ‘co-living’.
Co-living is a far better managed system with extra comforts and facilities and fewer rules and regulations, in comparison to the standard paying guest arrangement or rented houses. Such spaces typically offer shared units pooled with common amenities such as wi-fi, common kitchens, laundry, and housekeeping, etc which are all included as part of the monthly rental. It is a plug and play kind of a format with more flexible terms of exit and choices when compared to the conventional rental apartments.
The co-living market in India has been evolving at a rapid pace with newer operating models coming into play. It has brought in opportunities, primarily catering to young working professionals and student population, that are being serviced by a barrage of startups. Entrepreneurs and promoters of co-living companies are being heavily backed by investments from national and international institutional investors since they see a lot of growth and upside in this segment. Operators have started tying up with developers in major cities, especially the IT driven locations owing to the higher proportion of single-young professionals, for ready-to-move-in as well as built-to-suit property options to cater to the upcoming trends in the sector. As per recent pre-covid reports, the co-living market size in India is expected to grow more than double in the next 5 years to close to $14 billion, translating to ~6 million beds.
The evolving pandemic and lockdown have momentarily slowed down operations as well as begun to question our way of functioning across various segments and co-living is no different. With social distancing norms set to continue for the foreseeable future, co-living spaces may have to reinvent themselves. Cleanliness and hygiene will take prominence over all other things and this is infact an opportunity the organized players can cash onto.
The shift from unorganized PGs to the more organized segment would be more pronounced. Though most established players follow standardised practices, however, implementation of more stringent hygiene practices would now be required like frequent building disinfection and deep cleaning, daily and frequent sanitization of high-touch surfaces, etc to keep up the demand. These increased sanitization requirements would end up increasing costs for the operators, and with pressure on rentals, margins maybe impacted in the short term.
Though it will take some time for things to revive and revert back to the ‘new normal’, this segment should bounce back especially given that the shift towards organized play had just picked up with professional players coming in and hence should come back to normal sooner than later. Just for a perspective, the rental housing market makes up for 35% – 45% of the residential sector and is slated to grow steadily in the urban pockets.
For the ever-moving millennial population, co-living is one of the most beneficial means of accommodation by providing an affordable, convenient and safe choice in a new city. It also eliminates the equation of owners-vs-bachelors which is an ever-pressing issue while finding a good apartment to stay in. However, in an unprecedented time like this, co-living will be a challenge since most people will prefer to go back to basics and focus on single occupancies instead of sharing. The industry will have to bear with this for the next couple of months, but once businesses start settling in, there will be newer opportunities and the co-living market should bounce back.
(By Divya Seth Maggu, Director, Valuation & Advisory Services at Colliers International India)