Is co-living an answer to the affordable housing crisis?
Authored by Nikhil Sikri, Co-Founder and CEO of Zolo
According to an 2018 report by Arthayantra, even renting a 2 BHK house for households with an income below 11 LPA is very difficult in Mumbai. Renting a house is recommended to households with an annual income of up to 16 LPA in NCR. More than 90% of the world’s population is currently concentrated on about 10% of our land surface, and this density is only increasing. The explosion in urban populations will cause price-per-square-footage to skyrocket, prompting urban dwellers to rethink both the size and functionality of their homes. Sharing of spaces, or coliving, has been on the rise to augment the reduction in house spaces,
Behind the buzzy term, coliving is a concept that has been around for a long time. Coliving has taken many forms throughout history, including intergenerational communities in Scandinavia, communes in Arizona, circular cities in China, and SROs in New York. Each iteration is a different way of people coming together and organizing their housing environment in order to facilitate sharing. In the new avatar, the idea of co-living is to create a community-centred environment that not only provides privacy in living arrangements but also promotes social contact. The curated community in a coliving building fosters inclusivity that enables tenants to meet a variety of other individuals and expand their network. Firms that offer group activities within coliving spaces provide the opportunity for tenants to interact with other tenants, engage and build relationships. From group outings to simply having another person down the hall for a quick chat, it is a convenient way to find company.
As per survey findings by Knight Frank, 37% of the respondents were willing to spend only between INR 10,000–15,000 per month on accommodation per month, which was followed by 25% willing to spend only less than INR 10,000. This starkly points out at the difference between willingness to spend on rental accommodation and the type of rentals commanded in prime areas for letting out apartments in the major cities. Co-living beautifully fits in this price range in many locations and can help tenants achieve rental savings of 15% or more. If the rooms are shared on double occupancy, it further brings down the rentals and is a win-win situation for tenants with all amenities included.
In India, the co-living space has seen huge interest from founders and investors. According to a study by TechCrunch, co-living start-ups in New York and San Francisco alone have raised USD 78 million in 2017. The Collective in UK has alone raised USD 420 million. India is not far behind with Zolo Stays raising USD 30 million in January 2019 and Stanza Living raising USD 50 million in July. A recent report by JLL indicates that the supply of beds by organised co-living players is expected to increase to about 541,000 across the top seven cities by 2023, with Delhi NCR and Bengaluru accounting for more than 50% of the cumulative capacity. By 2023, India’s urban co-living market is set to become an INR 1-trillion opportunity. With the migrant population in India set to grow and the millenial population being more open to rent, co-living in India is all set to see a boom. With its emphasis on community, flexible and shorter lease terms, reduced security deposit and zero hassles with housekeeping, payment of utility bills, maintenance, furniture and fixtures, renewal of lease contracts, coliving is the answer to our housing crisis.
Co-living presents attractive returns at 6-8% at a relatively lower risk level, with a potential upside for developers operating on a build-own-and-operate model. Therefore, some developers have tied up with operators across India to lease out select towers from their township projects. Developers are also exploring opportunities to construct purpose built co-living facilities and either operate the same themselves or lease them out to operators. This interest from developers is further spurring on the supply of co-living solutions in the market.
As rents and house prices rise, people are living in shared houses for longer – whilst it was once seen as unusual, it is now very much the norm to be living with housemates well into your 30s and beyond. The benefits of co-living is also well suited not just young, single people but for couples, older people, and even families. Thus, with the intervention of technology, interest from developers and changing preferences, shared living spaces will be at the forefront of creating a harmonious and enjoyable experience for life.