Is Co-living the right option for you? All you need to know about the new living concept

The way we used to perceive the concept of ‘living’ has changed drastically, especially after the Covid. The pandemic has been an eye opener and we realized that living is not just about the space we occupy, but about experiences we gather and share to make life more fulfilling. While the residential sector has been constantly innovating to keep up with the changing needs, it is Co-living that is gaining fair share of attention. 

So, what this co-living is all about? Simply put, co-living is an alternate offering by the residential segment owing to the great demand for living space in urban cities. Almost all the major cities of India are facing the challenge of space scarcity, and co-living is a sustainable solution that is becoming widely popular to address this. Unlike a ‘Paying Guest’ where the occupants are sharing a space and paying a certain amount for accommodation & food, co-living emphasizes on the privacy of each resident, while offering certain shared amenities which creates a platform for social exchange.   

An ideal co-living space is a fully furnished home where the occupants get private bedrooms and attached private bathrooms, while there is a shared common area where people can socialize with other flat-mates. These living spaces are loaded with all the amenities and luxuries of quality living and are managed professionally by co-living operators or hosts who make sure that the quality of living experience is never compromised. Besides, this unique concept offers the occupants or residents to strike a perfect balance between privacy and socialization. Co-living spaces are affordable and offer a lot of flexibly which a traditional rented accommodation fails to offer. The concept which originated in Denmark, is getting widely popular in India as this living set-up or choice is ideal for the digital nomads, young working professionals, couples and students who are constantly relocating and moving spaces to make the most of the career opportunities and prospects.  

This asset-light model is bridge between affordability and luxury where the occupants can have a living experience that fosters a strong community feeling. Co-living operators are nurturing communities by emphasizing on organising social activities, events and workshops. They also tend to match residents with other like-minded people though personality profiling. A co-living facility offer amenities like WIFI, hassle free access and exit, housekeeping, private washroom, quality furnishing which are generally missing in shared accommodations like PG or private hostels. 

India – a torchbearer of co-living: The demand drivers, benefits and challenges 

The vibrant and growing economy of India is driven by a rising population of ‘millennials’ who form an important part of the country’s workforce. Digital imperatives and technological innovations have put the spotlight on India on a global scale, creating more opportunities and prospects for the millennials across the country to move to prominent hubs like Bengaluru, Chennai, Hyderabad, Pune, Mumbai and Delhi NCR. This has not only created more demands for quality housing, but also created the need to come-up with affordable and quality options of accommodation. Besides, these key metros have witnessed extensive uptick in rentals, making accommodation a costly affair for a lot of millennials who are migrating from Tier-II cities to pursue their dreams. A report by a global real estate consultant highlighted that 40% of the millennial workforce are migrants who have limited budgets, but rate flexibility and convenience at the top. 

All these factors posed a big opportunity to the co-living segment as one of the most viable and emerging asset classes. A study suggests that the ‘co-living’ market in the country is expected to grow at a CAGR of 17% and by 2024 it will touch nearly INR 1-trillion. A similar demand survey was conducted targeting the millennials – the most prominent target group for the co-living segment, across top 7 cities like Bengaluru, Chennai, Hyderabad, Delhi NCR, Mumbai, Pune & Kolkata. The result revealed that by this year the total number of supply of beds by organized co-living players will increase to ~5,41,00 and 50% of this will be dominated by the Bengaluru & Delhi NCR markets cumulatively.  

As far as the benefits as concerned, co-living offers win-win to all the parties – the occupiers, operators and the landlords. The key benefits which co-living offers to the occupants are affordability and access to amenities. The focus of the new generation, who are the target occupant group for the segment, have shifted from owning to sharing. They want to lead a quality life, surrounded by amenities, without bearing the financial load of owning or buying a property. Besides, they are part of the ‘sharing economy’ where a lot of daily services are modelled around this concept – like cab services, room booking for vacation, co-working etc.  As far as the operator’s perspective is concerned, a co-living unit can offer 10-20% operating profits. Landlords can also get 2 to 4 times rental yield as compared to traditional residential asset classes.  

Currently the key challenges are rising cost of properties and land, hence in India most of the operators are relying on lease and operate model. As this segment is still emerging and the players are still finding ways to explore the base of the iceberg, they are averse to the risks associated with the huge capex and liquidity. Hence, they are keen on taking up space either on fixed lease rental basis or revenue sharing basis. This given them a scope to scale-up while keeping the wheels running. As the market is evolving, operators are exploring other models like management Contract Model, Hybrid Model and Franchise Models. Each of these models has its own benefits and looking at the momentum it is anticipated that it will get good traction in the next 2-3 years. The segment is attracting interest of institutional investors and this will give the necessary boost to the segment in the years to come. 

Views are personal. The author is Managing Director, BCD Group.