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Uncertain economic conditions, loss of jobs, work from home, and migrants returning to their respective home towns in the wake of the Covid-19 outbreak brought the fledgling co-living sector to a grinding halt. While the year 2020 ended with co-living services providers reporting 45-55 per cent recovery compared to pre-Covid levels, the sector is expected to return to 2019 levels in both occupancy and rentals by December 2021.
India has 76 companies in the co-living sector, with 20 of them founded in the last three years. Total funding raised by the sector dropped sharply in 2020 to $66.27 million from $132.16 million in 2019, as per data from Tracxn.
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Tech-enabled co-living start-up Zolostays, which raised $56 million in Series C funding in July, crossed 50 per cent occupancy in December vs 80 per cent pre-Covid, after hitting an all-time low in July, as fears of an extended lockdown till September had people moving back to their home towns in droves. Co-living services start-up Guesture recovered to 55 per cent occupancy in December vs 98 per cent occupancy pre-Covid. NoBroker.com, which partnered with OYO LIFE in August to offer Co-living services, saw demand dip by 62 per cent for PG/Co-living spaces vs pre-Covid levels and is currently down by 49 per cent.
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A recent report by TheHouseMonk pegged the market size for Co-living (excluding student/senior housing) in India at $273 million in 2019, which dropped 46 per cent to $126 million in 2020. The average rent per tenant/per month dropped 15 per cent to $150 in 2020 from $175 in 2019.
Silver lining in the dark pandemic cloud
Dr Nikhil Sikri, co-founder and CEO, Zolostays, pointed out that the pandemic has been a blessing in disguise in some ways. “New customer onboarding is higher than pre-Covid levels despite other ‘mom n pop’ PG operators offering 50-60 per cent discount per bed. Customers value us for implementation of hygiene and safety precautions as per WHO guidelines, rent waivers across all our 400 properties during the lockdown, complimentary healthcare memberships to all residents, including medical insurance covering Covid-19, to name a few. Additionally, our entire corporate business was built during the lockdown, when we forged tie-ups with 100 + small and large corporates vs just 2-3 corporate customers pre-Covid.” Zolostays has 40,000 beds in 10 cities.
Echoing a similar sentiment, Sriram Chitturi, founder of Guesture and founding president of Rental Housing Association of India, said, “the push from unorganised to organised co-living spaces has been significant as people appreciate clean, hygienic and safe living spaces with multiple amenities, including urban mobility services, convenience stores, sports infrastructure, training spaces, co-working spaces, to name a few. There is no shortage of demand, the problem lies in inadequate supply of efficient Co-living spaces.”
Guesture is operational in 1 micro market (Electronics City) in Bengaluru with 3,100 beds in 500 apartments; with plans to add 7,500 beds in the next two years. “We are in the process of identifying potential partners in 25 micro markets in Bengaluru, Chennai, Hyderabad, Pune, NCR and MMR who will develop properties in these micro markets, which we will manage,” said Chitturi.
“Ever since the pandemic broke out, we have observed a steady decrease in demand for co-living spaces and PGs. While we expect a faster recovery in 2021, we expect that co-living will grow faster than PGs. There’s better control over sanitisation in co-living spaces and it is safer compared with PGs where bedrooms, washrooms and kitchens are shared among 8-10 people” said Saurabh Garg, co-founder and Chief Business Officer, NoBroker.com.
Outlook for 2021
The year 2020 has been difficult for the co-living industry and revival is linked to the return of the migrant millennial worker to major cities which, in turn, is dependent on organisations resuming ‘back to office’ policy, said Mahesh Khalap, Senior Director – Alternatives, JLL India. Overall average occupancy in co-living facilities hovered at 40-45 per cent in end 2020. We should see revival earliest by Q2 of CY 2021 with certain cities faring better than others. However, return to 2019 levels in both occupancy and rentals should be achieved only by end 2021, he said.
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