The success of co-working coupled with a need to cater to the growing millennial demographic has seen real estate players warm up to the co-living model to monetise their unsold inventory.
Real estate companies TOI spoke to said parts of their inventory are already operating as shared living spaces, and they are in ‘final stages’ of collaborating with co-living operators to put up unsold inventory with them.
Returns on the co-living model typically involve a revenue-share arrangement, and developers report opportunities to earn almost double the yield on a traditional renting model.
“Co-living model is a great option that satisfies housing needs of working millennials, and also offers us — the developer — almost double the normal returns,” Ajit Chordia, MD, Olympia Group, told TOI. Olympia has already turned over 100 of its apartments in OMR into shared living units in collaboration with co-living startup Zolo, with Chordia claiming 90% occupancy on these units.
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Navin’s, another large real estate operator in the South, is in advanced stages of talks with undisclosed co-living startups to adopt the model for its unsold residential units. “We are in talks for about 15% of our unsold inventory, and are looking at units in commercial hubs of Chennai such as Porur, Medavakkam, and others,” Navin, director, Navin’s, said. He estimates the model to yield returns almost ‘100 to 150 times’ traditional rental routes.
Vivek Rathi, senior VP, Research, Knight Frank India, believes India’s growing young workforce demographic, who are on the lookout for affordable and flexible living solutions, makes co-living assets a return generating one. “Co-living provides a better use of vacant buildings for an economic trade-off if property owners lease properties to co-living operators for sublease to young students or working professionals,” Rathi said.
Industry estimates place current inventory overhang levels at 18 months in metros like Chennai, going up to 30 months in the Delhi-NCR region, and said it has improved in the second half of 2018, aided by lesser new launches.
Co-living signifies community living and generally involves tenants sharing common areas such as the kitchen and a living room, and having a personal bedroom for privacy.
Depending on the operator, the model also satisfies the millennial need for frictionless living, offering housekeeping, laundry, and logistics support, among other facilities.
A recent survey by Knight Frank estimated that 72% of millennials in the ages of 18 – 23 years are looking to opt for co-living for their housing needs, given the lukewarm reception they get from traditional landlords.
CoHo, Zolo, Stanza Living, and Nestaway are a few startups who stand out in the space, and have also managed to attract funding from marquee investors such as IDFC, Nexus Partners, Sequoia and others.
Stanza Living, for instance, works exclusively on student housing, and is in talks with three large developers across Bengaluru and Chennai to set up student living hubs. “For a real estate player, yields are almost double in a student co-living model within the city limits, in comparison to traditional renting models,” Anindya Dutta, co-founder, Stanza Living, said.
Mumbai-based co-living space operator Zolo is present across major cities of Delhi NCR, Bengaluru, Chennai, and others, and is already working with 15 large real estate developers. Nikhil Sikri, co-founder and CEO, Zolo, considers co-living a win-win. “The savings for the users [renters] is generally close to 20% given the value-add facilities available in this model,” Sikri said.
However, the rise of co-living is not without hurdles. Uday Lakkar, co-founder, CoHo, admits that developers often share concerns of tensions in complexes where a sizable co-living population co-exists alongside family tenants. “We are in talks with a developer on a built to suit project for co-living, which can help counter such challenges,” Lakkar said.