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Why top builders are betting big on alternate co-living business
Live Mint  |  May 3, 2019

Bidya Sapam Mumbai
  • Given the rising popularity, large traditional builders are also exploring the co-living concept
  • Anuj Puri, Anarock Property Consultants, said rental yields offered by co-living spaces can go as much as 8-11% as compared to average yield of 1-3% in residential properties

 

Big real estate builders like Pirojsha of Godrej Properties Ltd, Abhishek Lodha of Lodha Group, Salarpuria Sattva Group and Brigade Enterprises Ltd are betting on the new emerging co-living space market to capitalise on its growing demand and potential revenue generation in key Indian cities.

 

Though still a fragmented market, dominated by private home owners who run paying guest (PG) facilities, a few start-ups like NestAway, OYO and CoHo are already operating in the emerging space targeting young working professional and students.

 

Given the rising popularity, large traditional builders are also exploring the concept and ready to try as an extension of their existing residential business and earn rental income.

 

Bengaluru-based real estate developer Brigade Group is looking to enter the co-living space with plans to start construction of its first co-living project in Bengaluru by next year. "We are definitely looking at this space as an offshoot of our residential business as well. We are identifying which of our projects can get into co-living," said Pavitra Shankar, executive director, Brigade Enterprises Ltd.

 

The company is looking at some of the large housing projects that are on the drawing board and likely to come next year as potential ones to start its co-living business, she said.

 

Even as the concept finds popularity in large Indian cities like Bengaluru, Mumbai, Gurgaon and Pune, co-living still remains a niche segment in the entire rental housing market. Rental housing occupies around 35-45% of the total residential market, according to data by real estate advisory firm Anarock Property Consultant Ltd. As per IMF estimate in 2016, India’s residential rental market was estimated to be over $20 billion, of which $13.5 billion come from urban areas, it said.

 

According to Anuj Puri, chairman, Anarock Property Consultants, rental yields offered by co-living spaces can go as much as 8-11% as compared to the current average yield of 1-3% in residential properties.

 

"This fact is definitely paving the way for a new asset class in real estate investing," said Puri said, adding that such spaces could also reduce the consumer's average cost of living by as much as "10-15% with optimal real estate utilization and economies of scale," he said.

 

Shared living provider Colive, which recently raised Rs 63 crore in Series A funding led by real estate Salarpuria Sattva Group, plans to utilize the money to scale up its operations from 12,000 beds to 1 lakh beds over the next two years. Bijay Agarwal, managing director, Salarpuria Sattva Group said that they have acquired 50% stake in the co-living venture. “Co-living in cities is a great idea which works well in cities as an intermediary arrangement between student housing and until one buys a house. It’s a profitable, volume-driven business," Agarwal said.

 

This week, leading real estate builders like Abhishek Lodha, Pirojsha Godrej and Harsh Patodia, chairman of Kolkata-based Unimark Group announced their investment in Gurugram-based start-up Housr which is gearing up to launch its first co-living property in the next four weeks.

 

Kalpesh Mehta, co-founder of Housr, said the company would look at collaborating with the builders for their future co-living projects though they are currently just their financial investors.