Co-living: A new asset class in Indian real estate

Slowdown in new launches, unsold inventories, new economic realities, mismatch between consumer demand and market supply…the issues that plague the real estate industry in India are not unknown. And as we wait for the revival in consumer sentiment and improved sales in 2018, it’s prudent to look at emerging realty trends across the globe that can be adapted to the Indian market. Co-living is the buzzword in many parts of Europe and the US - especially among millennials, who value convenience and a sense of community, over ownership of property. The Collective Old Oak in London, housing 546 people across 10 floors, has the distinction of being the world’s largest co-living space. In the age of shared workplaces and shared transport, it’s not surprising that a growing number of young and increasingly mobile consumers are opting for community living. In fact, the trend is already catching on in India, with co-living spaces in cities like Bengaluru and NCRregistering occupancies as high as 90-100 per cent! Smart space sharing So, what is co-living, you ask? Well, it’s a lot like living in a boutique hotel, with a centralised kitchen, laundry room and other recreational zones, in the company of like-minded people. Unlike typical apartments, co-living residences are, essentially, about intelligent utilisation of space. For instance, in a one-BHK (500-sq-ft), the bedroom plus bathroom occupies about 40 per cent (200-sq-ft) of the space, while the hall, kitchen and utility area takes up the remaining 60 per cent (300-sq-ft). Interestingly, millennial space utilisation patterns tell us that, we tend to spend more than nine hours in the zone using 40 per cent of the total sq. ft. and less than three hours in the remaining 60 per cent area. A co-living space changes this skewed ratio to increase the per sq. ft. utilisation of residential space. By encouraging the idea of sharing under-utilised spaces like the living room, kitchen and utility area, there is a massive opportunity to increase relative utilisation of real estate. The fact of the matter is that the structural design of living spaces hasn’t evolved with time. Despite the strides in architecture and design, we haven’t really addressed the question of optimising real estate utilisation. Co-living spaces are now doing that by sharing lower utilisation areas with a larger community – offering an economically viable solution to the mounting space crunch issues in our cities. Win-win situation It’s only a matter of time before more Indian realtors step in to the market. Primarily, because of the higher yield on property. The rental yield for co-living spaces can be as high as 10-12 per cent, as against the current average yield of 1.5-3 per cent on residential properties. From the consumer point of view, co-living spaces bring down the average cost of living by at least 15 per cent. Although a monthly rent of Rs 30,000 may initially seem steep, it’s a comprehensive sum that includes maintenance, water, electricity, Wi-Fi, furnishing, security, laundry, housekeeping, entertainment, and just about everything! Not to forget, the convenience of never having to chase a plumber or electrician to fix things at home. However, for most residents, the best part about co-living is the feeling of belonging to a like-minded community. And that’s priceless, especially for young millennials, who desire more out of life than a secure nine-to-five job. From barbeque parties and brunch get-togethers to movie nights and board games at home, there’s so much to explore and enjoy! Millennial mantra Millennials – folks in their 20s and early 30s – constitute over 30 per cent of India’s population. By 2020, their numbers are expected to rise to 40 per cent. That’s a huge market, one that Indian residential real estate is yet to tap into. The biggest difference between millennials and the earlier generations is their inherent sense of independence. Whether it’s in their personal or professional lives, they are willing to leave behind the safety of the shore and venture into unknown waters. Unafraid to embrace a new way of life, co-living works beautifully for the digital nomads. That’s not to say that the concept ca  nnot be tweaked to suit other residential segments. The economies of scale benefits certainly make it a feasible option for various niche groups, like young couples with kids or even senior citizens, for instance. Incidentally, we have been witnessing a steady upswing in the adoption of co-living spaces among women in India over the last year. The idea, basically, is to get smart about space utilisation, add a layer of design, and personalise the abode. Throw in the right mix of people, technology and service, and, bingo, you have a winner at hand! Internationally, real estate funds are closely watching the co-living space. For it holds the promise of healthy returns on investment and the possibility of the creation of a new asset class in real estate investing.   -- By Viral Chhajer, Co-founder and CEO, StayAbode