With the increased acceptance of shared spaces and the improved focus of realtors on developing customised co-living accommodations, the cohousing industry is bound to expand in India, and many global brands may set their foot in the country in the next couple of years.
What is co-living?
The dream of higher education and better work opportunities has created far-reaching results, and the most significant one is the emergence of co-living spaces. While this is certainly not a new phenomenon as co-living spaces and student housing have been in existence since the last thirty years; of late, there has been a shift towards making the sectors more organised. Typically, co-living involves multiple people or diverse young professionals of similar age, profession, education level and income bracket sharing a common living space, which could range from a 200-300 bed hostel building to single apartments.
Apart from space, majority of the co-living and student housing players also add a layer of value-added services such as food, housekeeping, laundry, security, R&M and shared facilities to make it a turnkey solution for the residents. The icing on the cake is the community engagement which these facilities offer in the form of either incidental engagement led by the thoughtfully curated common spaces or through organised events such as Diwali parties, exclusive trips, and speaker sessions.
Factors contributing to the growth of co-living spaces
Co-living spaces are booming due to the increased rate of migration to urban cities, and a large chunk of India's population falling in the 18-30-year bucket. In answer, these spaces offer turnkey solutions at reasonable rates. A recent UNESCO study stated that the student migration rate in India is increasing at 10 percent per annum, which means that the country will have 16.5 million migrant students by 2024. The urban migration rate has seen a similar trend and has increased up to 31 percent in 2011 from 27 percent in 2001. The increase is primarily due to the influx of young working professionals.
Business Models of co-living brands in India
Primarily, co-living spaces can be divided into student housing and co-living for young professionals. Apart from the target audience, the big difference between the two is the level of operational rigour which is significantly higher in student housing, as operators need to provide various services encompassing food, daily housekeeping, 24*7 wardens, laundry, security and engagement activities.
Both sets of players operate on three broad models that include leasing property for long term (includes fixed rentals and profit share), signing operational and management agreements and establishing an asset ownership model. However, most of the student housing and co-living players operate on the first two models, which is contrary to the way the industry has evolved globally. Due to the favourable spread in borrowing cost and rental yields, worldwide, most of the student housing players are asset owners. However, since the equation is inverse in India, most players have decided to be operators and to tie up with multiple developers as prop-cos. As the industry evolves and gets more organised, large developers/ real estate focused Private Equity houses would start acquiring these operators to create a joint prop-co (Company that owns the real estate) and the op-com (the operating company) structure.