Co-living: Ray of hope in the urban sprawl
• From taxis & private cars to shared cabs; from big private offices to common work spaces and from residing in hostels & PGs to the rise of co-living spaces – shared economy has made its mark in all realms of life.
• In an environment of escalating costs, migration to mega cities and shrinking resources, there has been a mushrooming of co-living spaces in India.
• While co-living has a plethora of benefits for the 21st century’s nomadic millennials, it also has something for property owners who lease their property and operators too, in terms of enhancing their revenue.
• While there’s optimism in the industry about the popularity of co-living spaces in India, there is a major bottleneck that needs to be addressed: the regulatory ambiguity surrounding it. Government should collaborate with these platforms to scrutinise the service providers.
Change is the unchangeable law of nature, and nowhere is this more evident than in the 21st century India. From taxis & private cars to shared cabs; from big private offices to common work spaces and from residing in hostels & PGs to the rise of co-living spaces – there are quite a few interesting transformations going around in the country. In an environment of escalating costs and shrinking resources, what is common to all these daily patterns of the millennials is collaborative consumption, which is the hallmark of a ‘shared economy’.
The World Economic Forum defines shared economy as an economic model which ‘focus(es) on the sharing of underutilised assets, monetised or not, in ways that improve efficiency, sustainability and community’. Thus, service providing platforms such as Uber, Ola, Airbnb, Zolo, Zomato & WeWork are all illustrations of this business model, which has recently gained currency in India. This article explores one such example of shared economy: the mushrooming of co-living spaces in India.
An estimate by the UN Department of Economic and Social Affairs (DESA), has revealed that India will have added 416 million urban dwellers by 2025, with New Delhi, Bombay, Hyderabad & Bangalore emerging as urban metropolises. That urbanisation is bound to happen in India is an inevitable fact. Moreover, cities like Delhi, Bangalore, Bombay, Chennai & Hyderabad will continue to be major sources of attraction for a lot of young Indians who would migrate to these cities in search of better educational/employment opportunities. As a recent FICCI report titled Co-living: Reshaping Rental Housing in India, has established, in 2018, millennials constituted around 42% of the workforce in India across top seven cities (Mumbai, Delhi NCR, Bengaluru, Hyderabad, Kolkata, Pune and Chennai), and are likely to grow at 6% CAGR by 2023.
Further, about 40% of the millennial workforce comprises migrants from other cities who have limited budgets, but prefer flexibility and convenience. Given the dearth of affordable land, skyrocketing rate of price per square foot in these cities, the possibility of transfer to another city and the limited income that these young migrants face, the real estate market is seeing a tectonic shift to bridge this scarcity gap. Now, established players as well as startups like OYO LifeZolo, Colive, Nestaway, Stanza Living & Airbnb have begun to offer innovative solutions to suit the need of such migrant millennials in India’s leading cities. A Cushman & Wakefield India report has forecast that co-living market size across India’s top 30 cities is expected to grow more than double by 2025 to US$ 13.92 billion from current US$ 6.67 billion.
A sustainable solution to the growing menace of urban space scarcity, co-living encompasses social exchange, flexibility and affordability, while guarding the principles of privacy & safety, hence making it the talk of the town. From a customer’s point of view, this an economical accommodation because it is light on his pocket as compared to owning and maintaining a house in a metropolitan city. Further, co-living frees the millennials from being bogged down by the added responsibilities of running a household independently at a time when people are working in offices for 8-10 hours on 5-6 days of the week and have little time for themselves.
Furthermore, co-living spaces in megacities are usually embedded with state-of-the-art, super aggregated, tech-enabled shared spaces for young working professionals and students. Further, the fact that these accommodation options are situated near major workspaces, and cut down on the commuting time between work & home is another factor that appeals to the millennials. Besides enabling an ease of living, these habitats also encourage social contact and community building through curated events such as open mics, cookout sessions, karaoke nights, and flea market for residents.
All in all, they’re a welcome respite for these customers as they break the monotony of their life through these social gigs and also keep loneliness of staying away from one’s loved ones at bay. Last but not the least, these models operate on the idea of safety. Trust is established by installing facilities such as biometric and facial recognition in addition to setting up a 24×7 concierge and hiring guards and wardens.
While co-living has a plethora of benefits for the 21st century’s nomadic millennials, it has something for property owners who lease their property and operators too. The most obvious advantage for these property owners is that they get a chance to make money using their property. Although rental yields have stagnated at 2-3% in the quintessential housing market, co-living presents attractive returns at 6-8% at a relatively lower risk level. According to industry estimates, most operators who provide combined services typically make a profit margin of 10-20% at the operating level and operate on an asset-light model pioneered by the hospitality industry. They act like brokers and boost their profit margins by charging a rental premium from tenants and landlords, without any hassle of managing their assets.