House hunting across cities is mostly a nightmare for paying guests (PGs) in India. But with the rise of co-living startups, help is round the corner.
- Co-living startups are coming up at a fast pace to disrupt the unorganised home rental market in India.
- These startups are well tuned to the needs of millennials and young adults, and are providing them with customised accommodations.
- Their entry is also bringing about welcome change in how the entire relationship between the landlord and tenants is managed.
- But these are early days and challenges persist, particularly with respect to low spending power, low yields and traditional mindsets.
When you move to a new city for work or study, one of the greatest hassles is to find a suitable accommodation for rent. This grand quest may cost you a lot of time and money along with several interactions with contacts/friends, landlords and middlemen. And then there is the prospect of arbitrary rules and regulations
hampering the overall experience. Good paying guest (PG) accommodations at convenient locations and suitable prices do not come easy.
The last Census in 2011 revealed that Indian cities have around 9 million vacant houses, but thousands of home seekers fail to get the deal they deserve. The rental market, like most others where startups have made their entry, is fragmented and unorganised. Moreover, build-to-rent hasn’t taken off at all in India.
Enter co-living startups – a new breed of players who have developed win-win business models to capitalise on the market and provide PGs their dream accommodation.
Source: Knight Frank Research, DKODING Intelligence
The rental disruptors
Over the past 3-4 years, a number of co-living startups are targeting youngsters in their 20s or early 30s, who are looking to stay independently away from their parents or change their city altogether. Today these house seekers have access to modern co-living spaces with laundromat, gym, Wi-Fi, kitchen and housekeeping.
The startups take care of all the needs of the PGs and ensure a hassle free experience. Fast Fox estimates home renting in India to be a US$ 32 billion market, growing at a CAGR of 10-15%. Among the trends driving the sector, India’s workforce is expected to grow to 600 million by 2022 from 473 million currently according to a report by Knight Frank. Student enrollment has grown by around 13% since 2013-14 to reach 36.64 million in 2017-18.
It suits their lifestyle to have on-demand homes customised to their needs, rather than the traditional long-lease model. App-managed shared housing is expected to reach US$ 2 billion by 2022 according to RedSeer.
Among the leading players in this space is Stanza Living, which provides student housing largely in Delhi-NCR. Launched in 2017, the company is an initiative by IIT & IIM alumni, led by Anindya Dutta and Sandeep Dalmiya in 2017. It has support from the likes of Matrix Partners, Accel Partners and Sequoia Capital, and has received a funding of US$ 732 million so far.
Stanza Living has a portfolio of 2,000 beds and plans to launch another 10,000 across other cities. The student housing market is estimated to be at around US$ 15 billion, and projected to reach US$ 45 billion by 2025.
Oyo Living, part of Oyo Rooms, has started 150 properties having 10,000 beds in Noida, Gurugram, Bengaluru and Pune. These include studios, 1/2/3 bedroom apartments available for rent on a shared/private basis. It plans to take this number to 50,000 and cover the top 10 metros by the end of this year.
Another such player is Nestaway, which was launched in 2015.The number of tenants for this startup has reached 55,000 across more than 25,000 homes in 12 cities. It targets reaching a million tenants, and taking its operations to an additional 10 cities. Zolostays caters to 16,000 beds in six cities and provides various property solutions like PGs, service apartments and independent flats.
CoHo leases apartments from landlords and makes them user ready. Uday Lakkar, CEO, CoHo, commented to The Indian Express on the company’s expansion plans:
“Last year we witnessed a five-fold growth. We now have 2,500 operational beds in Delhi, NCR and Bengaluru and plan to expand to 12,000 beds by 2019. We also plan to take our services to Pune, Hyderabad and Mumbai. We plan to raise US$ 10 million by the first half of this year.”
Property consultant Knight Frank conducted a research on respondents across India’s top cities in December 2018. Around 72% of the millennials gave a thumbs-up to co-living spaces and 55% of the respondents in the age group of 18-35 said they would consider them. The ideal rental they are willing to pay is Rs 10,000 to 15,000.
Source: Knight Frank Research, DKODING Intelligence
GREEN SHOOTS OF TRANSFORMATION
The entry of co-living players has brought huge scale and unlocked potential in the home rental market. This is also engendering a change in mindsets. For instance, most traditional societies in Bengaluru did not allow single men or women earlier. Nestaway is moving into a lot these localities rapidly, and has already provided accommodation to more than 20,000 women.
Home owners are now beginning to settle for 2-month deposit and one month rent in advance, as opposed to 10-month deposits earlier. Owners and PGs communicate with transparency on an app and rent agreements are now finalised by lawyers. Disputes are resolved by arbitration just like large companies.
Last but not the least, these startups are creating bespoke living experiences and bringing new innovations to improve living standards of students. For instance, Stanza Living collaborated with social startup SIRONA to launch a SIRONA Hygiene Pod, India’s first digital vending machine for female hygiene products.
The range of products that have been developed by SIRONA are now available for access by female residents in Stanza Living apartments. Co-founders Anindya and Sandeep commented on the partnership:
“Our aim is to plug even their (residents’) smallest daily needs. The partnership with Sirona: PeeBuddy is targeted at a specific concern – ensuring that our female residents can have round-the-clock access to healthy and enabling products under one roof.”
Stanza Living has also introduced path breaking amenities for students like smart space planning in rooms, gamifying food, roof decks to celebrate special moments and an entertainment and gaming lounge to relax.
- The co-living segment was among the top trends in the global market last year, attracting both millennials and people over 65.
- The trend has particularly boomed in cities like Singapore and Hong Kong where startup landscapes are booming and real estate prices are hitting the roof.
- Stable co-living spaces can provide yields of 12% as compared to 1.5-3% according to Knight Frank with efficient space utilisation, as the cost of shared spaces like kitchens gets amortised over more bedrooms.
- India is just beginning to witness the rise of co-living habitations thanks to the rise of a number of startups in the space.
- Disrupting a market with traditional mindsets takes time. Moreover, yields are also relatively low in India due to low purchasing power of students.
- However, these startups have made an important beginning, and will certainly reap the benefits as the market enters its high growth phase.