Co-Living Could Become A $93 Billion Market In India

Even though several players have already gauged the latent demand and have jumped into making the most of the opportunity the co-living space segment offers, this potential real estate goldmine still remains largely untapped. This is evident from the fact that the supply by organised players in co-living is currently limited to over one lakh beds. Assuming they earn Rs 1.44 lakh per annum per bed, organised players in this segment are currently generating a combined Rs 1,440 crore ($206 million). If the existing demand-supply mismatch is fixed, this segment has the potential to grow into a $93-billion market, data shows.

According to the University Grant Commission (UGC) data, there are 935 universities in India, affiliated with nearly 50,000 colleges and institutes. According to the Department of Higher Education, approximately 30.8 million students were pursuing regular higher education courses as of 2016. Out of this, nearly 12.3 million students were migrants. As per a survey of PropTiger,  total occupancy recorded in hostels within college campuses across India was only 3.4 million students, leading to a demand-supply mismatch of 8.9 million students. This deficit for co-living spaces is currently being met by the unorganised sector, which includes PG accommodation and rental houses, etc.

Similarly, trend analysis since FY12 highlights that approximately 160 million students enrolled for higher education on the pan-India level, as per the Department of Higher Education. Out of this, nearly 84 per cent of youth is employed, according to a report by the State of Working India 2018 (SWI). In total, India had 37.4 million migrant professionals earning Rs 0-10 lakh in 2018 who have completed their higher education between FY12 to FY16. A major part of this population is still served by unorganised rental options.

The co-living sector has total untapped demand of approximately 46.3 million beds, out of which 8.9 million is from student housing.

“Through innovation and tech, co-living players have created a completely new segment of the rental market in India. This market makes an investment in rental housing attractive and gives investor options to focus beyond the commercial office and retail spaces. The enormous size of this market is attracting larger players such as WeLive and Oyo living and driving up investment in this segment.” said Ankur Dhawan, Chief Investment Officer, PropTiger.   

Uttar Pradesh, Maharashtra, Tamil Nadu, Karnataka and Telangana together make up for 48 per cent of the student population enrolled in higher education in 2015-16 that will likely require accommodation near the college campus. Uttar Pradesh has the highest demand, nearly 19 per cent, followed by 13 per cent demand in Maharashtra. The southern states, Tamil Nadu, Karnataka and Telangana, have the combined demand of 16 per cent.

These numbers indicate that developers, who are focusing only on commercial office spaces to expand their rent-generating portfolio, need to seriously think about building spaces for co-living.

Why so?  

Rental yield in this segment is higher as compared to traditional ways of renting a property. Data available with PropTiger DataLabs show property for students in Sector 125, Noida, is expected to give approximately 8–9 per cent rental yield whereas housing for professionals is expected to provide nearly 5–7 per cent rental yield.

Investors also get a tax rebate on housing loan if they take a loan for buying a residential property. The investor can enjoy the benefit of the tax rebate, along with rental income, something that is not possible in case of commercial property.

What is happening now…

Entrepreneurs are launching co-living portals and tying up with real estate developers already to build project specifically meant for the co-living segment, especially for students and working professional. Packed with modern amenities, these spaces are designed keeping in mind the needs of the targeted segment. Co-living spaces meant for students are generally equipped with basic facilities such as housekeeping, laundry services, security and meals, apart from additional facilities such as gaming consoles, libraries, gyms, pools and high-speed Wi-Fi.

Company Name Headquarter  Investor        Investment  

($ Million)

Acquired/Merged Company # of Beds
NestAway Bengaluru Ratan Tata, Yuri Milner, Tiger Global, IDG, Goldman Sachs, UC-RNT Fund & University of California    94.0  Zenify 35,000
Zolo Bengaluru IDFC Alternatives, Mirae Asset, and Nexus Venture Partners    30.0 16,000
Stanza Living New Delhi Matrix Partners, Accel Partners & Sequoia Capital    12.0 2,000
Placio Noida Prestellar Ventures   2.0 Click-a-Home, Paco Meals 1,200
CoLive Bengaluru Ncubate Capital Partners   1.8 3,000
YourOwnROOM Bengaluru Angel Investors   0.8 1,500
ZiffyHomes Gurugram Angel Investors, Y Combinator   0.4 FellaHomes, Nivaasa Rental
StayAbode Bengaluru Akatsuki Inc. & Incubate Fund 1,350
CoHo Delhi Angel Investors 1,200

Source: Compiled by PropTiger DataLabs

Among the existing players in the segment are RentMyStay, Rentroomi, SimplyGuest and Flathood. Other players such as NestAway, Stanza Living, Zolo, Placio and CoLive have recently entered this sector and raised funds to spread the business. Lately, OYO Living has also entered the segment, with more than 2,000 beds in Noida, Gurugram, Bengaluru and Pune.

Incidentally, WeWork plans to bring WeLive, its serviced-apartment offerings in co-living formats to India, sometime in 2019. StayAbode and CP Developers are planning to build the world’s largest co-living project at Whitefield, Bengaluru, with the total capacity of 1,400 people. Global major Warburg Pincus and Lemon Tree Hotels have plans to invest Rs 3,000 crore to develop full-service accommodation for students and young working professionals.

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