How Will Covid-19 Impact Co-Living
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In India in the midst of a 40-day countrywide lockdown because of the novel coronavirus pandemic, co-living companies have seen almost zero demand. They are expecting occupancy to be down by 40-50% in May. Many of them have also cut down their growth projections by half. While the co-living market size across India’s top 30 cities was expected to grow to $14 billion by 2025, with social distancing becoming the new norm, Indian co-living startups are unsure about how it could shape people’s mindsets with respect to community living.
With the Indian unemployment rate expected to spike to 31%, a prolonged slowdown affecting consumer spending, corporates aggressively exploring the option of Work from Home for employees and companies having paused recruiting fresh graduates on a large scale, the coliving players targeting early-stage working professionals might be affected hard. The student housing may be slightly less impacted due to the nature of demand.
Rent collection from existing residents are also becoming more and more difficult:
Many startups and IT companies have already started laying people off.
Most of the Indian corporates have declared to defer hikes and incentives for this year.
Many of the residents who had gone back to their homes before the lockdown, may refuse to pay up.
The startups have started offering rent discounts to incentivize the tenants to pay. Pre Booking amounts and upfront deposit payments are also being looked at.
However, the lockdown also comes with a silver lining. It has forced the startups to go back to the drawing board and relook at the business fundamentals:
Many of the startups which had minimum guarantee agreements with the property owners have started negotiating with them for changing the agreements to revenue share models
Companies have started targeting corporates and educational institutions more rather than retail customers. It creates a win-win situation for co-living platforms that get bulk demand and branding opportunities for employers.
The platforms have also used the lockdown to set straight internal processes and increase internal efficiencies. Many of them are outsourcing secondary functions and creating leaner systems.
A few businesses may also consider acquisitions. Consolidation may happen with smaller players either folding up or being acquired by the well-capitalized established co-living platforms.
Col-living players are already starting to change how they operate when the economy opens up again:
Co-living spaces are ramping up their hygiene and sanitation standards. Increased frequency of housekeeping, sanitizers at places where people come together often, increased scrutiny on cleaning practices, and PPEs are set to become the norm.
Many of the players have started conserving capital. With future growth expectations looking muted and large funding rounds and sky-high valuations looking unlikely, these startups are trying to create lean organizations and scale sustainably.
Startups are tying up with insurance companies, healthcare providers, sports arenas, and focusing on community experience to cultivate loyalty among their customers. Some may also ask residents to wear masks when outside of their private residences.
Platforms are also trying to transform their offline community activities into equivalent online avatars.
And despite all the doom and gloom surrounding the economy, co-living may emerge as the long term solution for urban India. With PGs kicking people out just before the lockdown, COVID-19 has also increased the value of co-living in the eyes of migrant professionals through their efficiency, convenience, and transparency. This pandemic has also brought the co-living communities closer and brought forth their ability to self-help and triage operational challenges in delivering social distancing strategies. Subdued real estate prices in the near future may help co-living players achieve sustainable growth. Developers might become more interested in co-creating BTS spaces with co-living platforms. Hygiene conscious customers living in PGs will look to move in with co-living players and their solution might fit in perfectly with the changing nature of work - work from home, short term with perpetual transitions.