Co-living could be the future of housing for India’s millennial workforce

Where the heart is.
Where the heart is.
Image: CoHo
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India’s young, unmarried, and mobile professionals have long been viewed with suspicion by landlords for their perceived exuberance and brashness.

However, their housing nightmares may not last long, given the slew of startups betting on co-living as a solution to young urban Indians’ home-rental woes.

On Oct. 22, Softbank-funded hospitality startup OYO announced the launch of OYO Living, its new co-living vertical that targets young professionals in four Indian cities. The Gurugram-based company is the newest addition to a growing list of firms joining the co-living segment.

Co-living, or community living, involves tenants sharing common areas such as the kitchen and the living room while still having some privacy—generally a personal bedroom.

Over the last five years, co-living startups such as NestAway, Zolo, and CoHo have entered major Indian cities with backing from well-known investors like Sequoia Capital and Goldman Sachs.

These firms are emerging as an alternative for an increasingly mobile generation—bred on technology, with no fixed home.

Millennials are good for business

Most co-living startups are targeting young professionals and university students, a rejected lot in India’s traditional rental market.

Housing complexes often put up signs banning “bachelor” tenants, perceived as not being traditional enough to live alongside families.

“Millennials are accustomed to convenience. They are willing to pay for premium services for a frictionless experience,” says Uday Lakkar, co-founder of the home-rental app CoHo. “But that convenience is missing when it comes to long-stay accommodation, where they are back to the good old world of brokers and judgemental landlords.”

Brokerage fees, as well as hefty security deposits and long-stay commitments, are added hassles for a floating population of urban dwellers who are estimated to switch jobs and homes every 20 months.

“We help our residents save on brokerage, lock-in periods, and the hassle of searching house helps and support services involved while moving to a new residence,” says OYO’s chief growth officer Kavikrut.

But it is not just the hunt for a home that the startups say they’ll simplify.

Tenants can pay rent digitally, and request maintenance and repairs on the startups’ apps. In keeping with the flexibility of millennial lifestyles, CoHo lets tenants choose weekday meal plans if they prefer eating out on the weekends, and OYO will be offering “weekday accommodations to avoid the daily commute.”

Business model

India’s residential rental market is estimated to be worth $20 billion (Rs14,665 crore), 67.5% of which is in cities. 

The country is also home to the world’s largest population of young people, one in three of whom is a migrant.

Shared housing is not new to young Indians. For decades, university students and young professionals on a  budget have been staying as paying guests and in hostel accommodations, but co-living startups are revamping what until now had been a largely informal sector.

These firms work in either of two ways.

They can serve as middlemen between tenants and landlords, charging a commission on monthly rent. NestAway, for instance, acts more like a listing service for both shared and private accommodations, along with providing tenants with additional services such as on-demand housekeeping.

On the other hand, firms like CoHo and Zolo are leasing entire apartment buildings and converting them into co-living spaces. At higher rates, tenants can include services like regular housekeeping in their monthly deal.

OYO is also taking the second route and is initially leasing more than 35 properties to customise them for co-living.

“It is a value-addition on the side of the asset owner as well. Because they have their property maintained as well as earn a fixed revenue,” says Ujjwal Chaudhry, engagement manager at RedSeer. “The agreement is such that the owner gets a rent from the companies every month irrespective of whether the property is occupied.”

No man’s an island

Though its scale is to be fully ascertained, India is staring at a loneliness epidemic.

In 2004, a government survey by the National Sample Survey Office found that 4.91 million people were living alone and suffering from loneliness.

Migration of young professionals and students to cities has only risen since then. A Nielsen survey reported that single-person households have increased by about 35% between 2007 and 2017, mainly in cities.

While developing a social circle in a new city can be daunting, co-living startups say they can provide a sense of community. From home events to simply having another young person down the hall for a quick chat, it could be a convenient way to find company.

“Someone will text and ask other house members on the WhatsApp group if they want to play badminton in the evening. We’re doing a cards game and a movie this weekend at one of our houses,” says Kevin William David, a 29-year-old marketing executive who stays at a private apartment in a building managed by a co-living startup in Bengaluru.

“But frankly, I haven’t been to any of these events,” he adds.

What’s next

Co-living firms are still just nibbling at the market share. “95% of the competition is still uncles and aunties renting their houses,” said CoHo’s Lakkar.

“There is a large market for these services, though more of it is concentrated in the metros. But there can also be specific markets, like cities in south India which have a large number of colleges,” Chaudhry said.

But not all signs are optimistic. Startups are also burning through funds amid mounting losses. FellaHomes and Wudstay, both headquartered in Gurugram, shut shop last year after mass layoffs proved inadequate. Mumbai-based Grabhouse, which only a year before had secured $12.5 million funding from Sequoia Capital and Kalaari Capital, was acquired by Bengaluru-based property listing platform Quikr in 2016 after cost-cutting measures.

Retention of customers too can be tricky. “Most of these young people are going to be there for a short time before they start a family and want to move into a private home,” said Vijay Anand, founder of The Startup Center, a Chennai-based startup accelerator.

Perhaps that’s why the firms are also beginning to branch out. NestAway acquired rival app Zenify last year to offer home rentals to families. Bengaluru-based Zolo’s Select programme is targeting single women over the age of 40.

OYO has just entered the segment, but it too is looking at other demographic groups. “We aspire to eventually offer OYO Living spaces to newer target audience segments, like retirement homes for the growing population,” Kavikrut said.