Redefining Swanky Accommodations: Co-Living Spaces
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When Ankita Mishra got an exciting job opportunity in Hyderabad with one of the leading IT companies in the world, the 21-year-old girl from Odisha was all excited and raring to go. She arrived in the city of Nizams with high hopes. But her dream began to turn into a nightmare as soon as she reached the property dealer’s dilapidated office. And then began her endless search for her new home. Like Ankita, every year, hordes of millennials leave their homes for big Indian cities to pursue their dream careers. Although lucrative career opportunities are aplenty in Indian cities, but finding an appropiate accommodation becomes a problem for them. Often, they have to face rejections from landlords. And if they get accepted, they have to live by the absurd rules and regulations of their new domicile. But all that has changed in recent year with the advent of a popular renting concept – co-living. Co-living spaces offer students and working professionals to opt for a private room or a shared accomodation in a furnished apartment with all the amenities, that too at a minimal rental. The concept, though new to India, has been around abroad for quite sometime.
It, in a way, helps people of different cultural backgrounds mingle. For working professional Amrita Paul, when she went to the UK to pursue her master’s degree at Newcastle University, it was a welcome surprise to live with Spanish, German and American fellow students under the same roof, sharing the same kitchen (which often led to many potlucks!). Conversations over meals acquainted her with cultures and traditions of her flatmates. And she had a room of her own for privacy. With the popularity of co-living spaces burgeoning in India, a good many startups and businesses have come up with quirky and colorful spaces to cater to the Indian millennials’ taste. The growth of these spaces have been given impetus by hearty acceptance of students and working professionals.
The 'Cool'-living Quotient
There’s no denying that in India, the concept of co-living spaces is a cherished one. Many would still argue that it’s the old-fashioned paying guest model turned around with a fancy name. But that’s a fallacy — what really drives the concept is affordable convenience and comfort. A recent report titled Co-Living - Rent a Lifestyle released by the leading property consultancy Knight Frank, stated that in India, a staggering 72 percent of millennials (18–23 years) have given co-living spaces a thumbsup and over 55 percent respondents of the survey in the age group of 18–35 years are willing to rent co-living spaces. When Devashish Dalmiya was vacationing in Europe, he came across the concept of community living. Upon returning, he tried introducing the idea of living in a community with like-minded individuals. He teamed up with Varun Bhalla and Viral Chhajer on his return, which led to the beginning of StayAbode. “We are looking to ease the transition young professionals make when they move to a city for a job. We solve the living equation, which is hassle-free with managed living spaces, and low deposits along with a great community of likeminded people,” says Chhajer.
When one thinks of cities like Delhi or Mumbai, one is bound to feel that problems and restrictions pertaining to accomodation would be minimal. But the reality is quite different. Uday Lakkar, founder, CoHo.in, recollects several instances where his friends faced discrimination based on community background while living on rent. “Even now we see notice boards saying ‘Bachelors and Dogs are not allowed here’. The overall quality of youth accommodations in India was in an abysmal state with inconsistent services, poor infrastructure and no technology whatsoever,” he says. A great example of how well the co-living spaces are doing in India is the success story of Ziffyhomes. When Sanchal Ranjan and Saurabh Kumar started Ziffyhomes, they did so with just three apartments. “Twelve rooms got occupied in just two days with a waiting list of 30+ applications, that very moment we left our jobs to pursue ZiffyHomes,” says Sanchal. Ziffyhomes has today even acquired a startup from the same space – Fella Homes – to expand its reach. But the main driver of the co-living spaces is the radical change in expenditure, according to Nikhil Sikri, CEO of Zolo. He says, “People don’t want to pay large deposits, pay for furnishings, they can’t commit as they don’t know for how long they will be in a city. We perceived this gap and saw it as a viable opportunity for us to explore.”
Home for Students
Same as the global scenario, one of the most interesting aspects of co-living spaces is student housing. Differentiated as a separate market, the student housing concept is more relevant to India due to poor quality of hostels as well as rising expenses of living in these hostels.
For Anindya Dutta and Sandeep Dalmia, co-founders of Stanza Living, it was their collective experience in the student housing market in India and abroad that led to the idea of creating a unique and high-quality student living concept in India. They found that the student accommodation space in India lacks quality infrastructure and personalized services, which is a significant gap. Stanza Living was launched in 2017 with two-residences in Delhi and today, they have over 16+ residences with 2,000+ bed capacity across Delhi, Noida and Greater Noida. The duo bets on the student housing sector in India, as the sector generates in excess of $15 billion in revenues annually and is expected to grow multi-folds. “On an average, the segment receives demand from around 11 million migrant students. We believe there is significant demand for a professionally-managed, tech-enabled student living experience and the consumer is keen to experience a disruptive value proposition like ours,” Dalmia says.
A report by Goldman Sachs India Consumer Close-up and JLL Student Housing says that the market size of India’s residential rental market seems to be in the range of $45 billion for millennials in the age group of 18-31 years. In the rapidly changing landscape of the country, co-living is for the new India, believes Sikri. “Not only does Zolo help customers but also real estate players. Going by the recent trends, coliving may offer a higher rental yield of as much as 8-11 percent, as compared to the current average yield of approximately 1-3 percent in residential properties in India,” he says. In Bengaluru, a number of co-living spaces have opened up and opportunities are aplenty. Rajesh Kotta co-founder of Square Plums says that in Bengaluru alone, close to 600,000 youngsters live in PGs and this number is increasing by about 10,000 every month. “The way gated communities, IT parks and malls have come into being in the past 10 - 15 years, the next five years will see co-living parks come up,” says Kotta. Nikunj Batheja, co-founder and CEO, Homigo, feels co-living spaces are much more than merely fancy PGs as they are built keeping in mind the requirements of dwellers. The IIT Kanpur graduate started the company along with his batchmates Jatin Mitruka and Aakash Verma in 2014 in Bengaluru, after they were forced to cross paths with sly brokers. “Co-living offers the option of paying for only the spaces that a person is going to use, which makes it attractive for an individual,” he says.
Not Just Bricks and Walls
Lakkar shares that the real estate industry suffers from lack of trust and unprofessional approach from the brokers and service-providers. “CoHo is trying to exactly address this trust issue by creating a trusted brand that promises and delivers high quality services and experience to its residents,” he says. Given that there are multiple startups functioning in the area now, gaining the trust of the consumer too has become a difficult task. “A lot of customers were vary of trying our concept as they thought we are a ‘on the fly’ company and it might not be safe to stay in our accommodations,” says Batheja. That's where startups bring in their USP.
At Homigo, they brought the concept of community living. That’s how they convinced their investors too, with the idea that they are building a community that tells you, you are not alone in a new city. Another challenge, Chajjer says is to secure high quality supply of co-living spaces at the right locations. He says that most of the inventory that is currently available needs refurbishment, which drastically increases the turn-around time to get these places up and running. Educating the masses about the concept as a whole is another issue. “We focus on branding and telling our community story through social media and our website. Customer education for us starts right from the time the consumers visit our properties to understand how the product is different from any other available option in the city,” says Chajjer. The sector has seen a massive investment flow coming in. Stanza Living has raised funding from marquee investors like Sequoia Capital, Matrix and Accel. The founders at Stanza Living believe it was their laser-sharp focus to cater to student housing that brought these investors on board along with the fact that they bring a disruptive business proposition and approach to a traditionally unorganized space. “We are using technology to create a seamless and efficient student living ecosystem – from property procurement, to design and operations, and the delivery of services to the end consumer – our technology interventions are driving better business efficiencies and consumer experience,” says Dutta. Global investors too have placed their bets on this sector. ZiffyHomes has raised investments from YCombinator and Tiger Global. Ranjan says that global investors look for opportunities where there is a possibility to scale and become a unicorn. “We have seen growth of companies like WeWork and Airbnb happening in past and there is no escape from the belief that India is eventually becoming a part of that ecosystem. Our investors see the same opportunity,” he says. Meanwhile, Zolo’s Sikri credits his revenue model for driving investment. They acquire properties from the builders and owners, and revamp them with an array of services. “While our revenue model is solely based on the rents received by our tenants, our service standards and an early dominance over the market has clearly helped us stay afloat. Our model is a win-win-win for the builder, the tenant and us.
(This article was first published in the January 2019 issue of Entrepreneur Magazine. To subscribe, click here)