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RESEARCH

3ContentIntroductionAn introduction to co-living concept, renting philosophy,evolution and characteristicsGlobal scenarioLocations that lead the packKey operatorsEvolving trends1Other rental models vs. co-livingTypes of co-living models in India4Co-livinglandscape in IndiaChallenges associated with traditional rentalhousing models in IndiaThe demand side factorsOn the supply sideMillennials and the world ofplug-and-play livingEnd-user survey findingsThe 3Cs - convenience, community and collaborationThe appealing model of flexible memberships26Way forwardNot just astart-up storyOpportunities for investors, real estatedevelopers, landlords, co-living operators,corporates and consumers.Return economics for a stable co-living asset5

4RESEARCHCO-LIVING: RENT A LIFESTYLESection 1IntroductionCo-living – Concept andrenting philosophyCo-living, the new mantra within theambit of alternative asset classes is aform of housing which combines privateliving spaces with shared communalfacilities. The idea of co-living is to create acommunity-centred environment that notonly provides privacy in living arrangementsbut also promotes social contact throughcommunity events. As an asset class, coliving seeks to build a community centredaround ‘real socialising’ in a world wheresocial media platforms, such as Facebookand Instagram, are the virtual alternativesfor socialising for millennials. The biggestdriving force behind the rising popularityof co-living spaces are the young rentersmoving to new cities for job prospects whoare looking to meet and connect with newpeople.In India, the co-living concept is gainingwidespread acceptance and has broughtto the fore some new models in the privaterental sector. Though the concept isnovel, it’s here to stay, as India’s millennialpopulation currently accounts for 440million1. The growing interest for co-livingspaces in cities such as Bengaluru, theNational Capital Region (NCR) and Punehas been instrumental in many investorssitting up and taking notice of thisemerging sector to diversify their portfolioand risk.The renting philosophy for co-living spacesis derived from millennial behaviourwhere such renters share less utilisedareas such as living spaces, kitchen,balconies, etc. in order to make aneconomical rental decision and be part ofa working community. Their willingness tosacrifice these spaces in their individual1Media reports, Livemint news article Feb, 2018units, if these options are available inthe apartment buildings they stay in,help operators to arrive at different allinclusive membership packages whileaccommodating more individuals on asingle floor plate. The icing on the cakeis the design appeal of these apartmentbuildings which encourage socialisation.To cater to this sort of renting philosophy,many buildings in prime locations suchas city centres, near employment hubslike IT parks, special economic zonesor universities are being redesigned,repositioned and rebranded keepingmillennials in mind. This trend is givingimpetus to an organised rental market incities such as Bengaluru, NCR and Pune inthe same way as co-working spaces did forshared office spaces.Evolution of co-livingCo-living or ‘communal living’ is not a newconcept invented to cater to the millennialpopulation’s housing preferences. In fact,in many countries it dates as far backas the seventeenth century. Medievalvillages, religious cults, monks living inmonasteries, the hippie movement ofthe 1970s, boarding houses, Post WorldWar II housing are all examples of coliving solutions that catered to a commonbelief system while also addressing theeconomic constraints of its inhabitants.Boarding houses, in particular, served asa transient way of city life, most popularin America where boarders typicallyincluded homegrown and foreign-bornlabourers rushing to cities for employmentopportunities. These boarding housesserved as a stepping stone for youngadults and helped them bridge the gapbetween family life and independence. As

6RESEARCHCO-LIVING: RENT A LIFESTYLEOther rental models vs co-livinga vast mobile workforce flooded into citiesdemanding more independence, boardinghouses were gradually replaced by cheaphotels designed for long-duration stays. Aspeople earned more and got richer, theywere willing to pay more for ‘more’ spaceand ‘more’ privacy. Reconceptualisingthe old idea of co-housing of the 1960s iswhat co-living in today’s time is all about.Urban environments attract large scale inmigration putting the limited housing stockunder pressure. Coupled with prohibitiverentals and unavailability of micro units indesired locations, co-living in the modernday world is evolving parallelly with thegrowing millennial population as theycomprise the largest share of workforceglobally.Table:1Comparison of rental optionsCARPET AREA OF A ONE-BEDROOM UNIT IN EACH TYPE OF ACCOMMODATIONResidential rental unitCarpet area in sq ft(in sq m)Characteristics Of Co-Living1.2 P rivacy amidst communality - Aniche within a niche - Co-living(12–16 sq m)Serviced apartmentaccommodationaccommodation160–170 sq ft120–150 sq ft120–170 sq ft(15–16 sq m)(11–14 sq m)Co-living(11–16 sq m)INDICATIVE RENTALS FOR A ONE BEDROOM UNIT ON A PER MONTH BASIS ACROSS SELECT LOCATIONS IN BENGALURULocation1.1 Tech-driven easy living – Technologyis a prerequisite for today’s youngadults to manage their lifestyle. Ithas revolutionised the way digitalnomads work, live and play. Co-livingoperators use modern technology todevelop mobile apps which create anonline platform, giving the residentsaccess and flexibility and smoothenscommunication between the tenantand operator. The residents canprovide feedback or complaints andask for services like housekeepingthrough these apps. Moderntechnology can enable new forms ofsustainable living and encourage socialinteraction between the residents ofthe same operator but living in differentlocations or communities. Apart fromthe mobile app, co-living operators aretrying to make the most of technologywith surveillance, facial recognitionsoftware or biometric or keylessaccess for the absolute security of theirresidents and staff.125–165 sq ft*Paying guestaccommodationspaces draw a thin line between livingtogether but differently. Such serviceproviders supply wider infrastructureof civic participation, communityenterprise and the sharing economy.A lot of community-focused socialevents are organised to improve thesocial engagement between residents.Many co-living operators organisecommunity-led events such as yogaclasses, barbecue nights, laughtermashups, story-telling events and pizzanights for the modern-day city dwellers.1.3 ‘No strings attached’accommodation - Co-living spacesare ideal for anyone on a non-fixedasset model; people who are lookingfor complete flexibility and homesthat are fully furnished, serviced andmanaged. These usually operate ona plug-and-play model that savestenants the hassle of dealing witheveryday household chores and alsofrom the burden of paying frequentutility bills. The monthly rent usuallyincludes a host of facilities and utilitieslike – TV, housekeeping, Wi-Fi, cable,common kitchen and laundry spaces,maintenance and all the furnishings.With no lease contracts, the residentshave the flexibility to stay for as long asthey need and as their work demands.1.4 C o-living’s economics formillennials – With a very vastglobalised workforce, today’smillennials are travelling and relocating very frequently, due to whichthey are looking to cut back on costs.The rentals charged by these co-livingspaces are usually inclusive of alladded facilities and yet affordable forthe average young professional. Thelock-in periods for co-living spacesusually vary from two to six monthsand the refundable security deposit forsuch short-term lease options are onlytwo to three months of rent.Fully furnished residentialunit on rent**Paying guestaccommodation singleoccupancy***Serviced apartmentaccommodationCo-living accommodationsingle occupancyKoramangalaINR 27,000–35,000INR 13,500–16,000INR 75,000–105,000INR 12,000–17,000HSR LayoutINR 17,000–25,000INR 15,000–18,000INR 42,000–72,000INR 14,000–19,000MarathahalliINR 18,000–27,000INR 12,000–17,000INR 48,000–73,000INR 8,000–13,000WhitefieldINR 16,000–23,000INR 10,000–13,000INR 71,000–93,000INR 10,000–15,000APPROXIMATE TOTAL MONTHLY PAY-OUT ACROSS SELECT LOCATIONS FOR EACH TYPE OF ACCOMMODATIONIN BENGALURU1LocationResidentialPaying guestrental unitaccommodationKoramangalaINR 35,000–43,000HSR LayoutServiced apartmentCo-livingaccommodationaccommodationINR 15,500–18,000INR 75,000–105,000INR 12,000–17,000INR 25,000–33,000INR 17,000–20,000INR 42,000–72,000INR 14,000–19,000MarathahalliINR 26,000–35,000INR 14,000–19,000INR 48,000–73,000INR 8,000–13,000WhitefieldINR 24,000–31,000INR 12,000–15,000INR 71,000–93,000INR 10,000–15,00022Source: Knight Frank Research*Derived from an average size of a 1 BHK apartment which is typically around 600 sq ft super built-up area.**Includes all available constructions available on rent in different micro markets.***Including PG accommodation only in the organised market.1. Inclusive of other charges in addition to monthly rentals which are not included in indicative rentals2. The above figures are estimated for each type of accommodation located near the major educational and IT hubs, and the above-mentioned figures do not include the expenses on foodas that is very subjective.

8RESEARCHCO-LIVING: RENT A LIFESTYLETypes of co-living models in IndiaOTHER PARAMETERS AND THEIR INCLUSION IN EACH TYPE OF ACCOMMODATION3ParameterSecurity deposit requirement4ResidentialPaying guestrental unitaccommodation10 months’ rent1 month’s rentServiced apartment1.1 Lease and operation – This is one of the most prevalentCo-livingaccommodationaccommodationNo deposit2 months’ rentspace utilisation and to generate income from these assets.model, the operator does not have any real estate ownershipSafina Hotel on Infantry Road have been beautifully convertedbefore subleasing them to renters. There is a revenue sharingoperating on 100% occupancy for the past 18 months.operator of the co-living service provided to the renters. In thisIn Bengaluru’s central business district, parts of the erstwhileand takes the properties on lease from property ownersinto a co-living facility called ‘The Hub’, which has beenNot includedNot includedIncludedIncludedMealsNot includedIncludedOnly breakfast is includedNot includedupon the state of the property, upgradation requirement,Electricity/ WaterNot includedIncludedIncludedIncludedhave learnt that if the property owners invest in redesignHousekeepingNot includedIncludedIncludedIncludedInternetNot includedIncludedIncludedIncludedarrangement with the property owners, which varies dependingetc. From market interactions with co-living operators, weand furnishing the co-living space, the revenue sharingarrangement is 50:50. However, if the co-living operator makesa capital investment in the co-living space upfront to redesignthe space and add furnishings after leasing the property fromthe property owner, the ratio changes to closer to 70:30 in theirfavour.1.2 Full ownership and management of operations – This is aco-living model in which property owners convert, repositionand manage their existing properties as co-living spaces. InIt’s not AirbnbAirbnb is an online marketplace and hospitality service thatallows people to rent short-term residential accommodations,primarily homestays and the properties listed are neither professionally run hotels nor serviced apartments. Airbnb is targetedtowards short-term travellers/tourists who want to experiencethe bona fide lifestyle options of a place. On the other hand,a co-living space is a form of shared housing that combinesprivate spaces with shared communal facilities and aims to promote social engagement between residents. Co-living operatorsacquire or lease properties and convert them into homes that areaffordable with the purpose of addressing the housing needs ofmillennials who are migrating to new cities. The average periodof stay in an Airbnb accommodation would be about one to twoweeks, whereas the average period of stay in a co-living spacewould be nine to twelve months. Both the concepts exist as partof two absolutely different asset classes centred around differenttarget segments.In a co-living space, the communal activities that take placepromote building relationships and a sense of neighbourhood.While living in a co-living space, people start valuing communality deeply, but can also retreat into their private space, if theylike. What separates co-living spaces from an Airbnb apartment are the facilities and utilities they offer and opportunitiesfor civic participation with other residents. The infrastructurerequirements in a co-living space would be more inclined withcohabitation and collaboration, whereas the infrastructure in anAirbnb apartment would aim at giving the travellers a comfortableplace to stay that is affordable and functional. Co-living operators use technology to create mixed communities, support thewell-being of the residents and through 24x7 CCTV surveillanceand mobile apps they ensure safety for the residents and staff.On the contrary, Airbnb, an established home rental aggregator,uses machine learning and artificial intelligence to bring morepersonalisation and ease the end-to-end travel experience fortheir customers.Airbnb’s aim is to democratise travel for people all over the worldby allowing them to belong anywhere, with the flexibility of justpacking their essentials and moving from place to place. For theyoung professionals who are quite immersed in the nomadic lifestyle, co-living spaces are the answer to quality accommodation,since with rapid urbanisation in urban areas, living spaces aregetting smaller and housing is becoming more expensiveetc. are being converted into co-living spaces for betterco-living models in India, wherein a third party acts as anCommon area maintenance chargesSource: Knight Frank Research3.Indicative of other parameters which add on to total monthly payouts over and above rentals4.Security deposit is not included in monthly rents or approximate total monthly payoutset up as guest houses, hotels, beauty salons, tuition centres,this model, no third-party operators are involved for operationsand owners pocket all the profits which are ploughed back intothe management of property and expansion of operations.Since the property owners are using their existing properties toconvert into co-living spaces there is no capital expenditure atthe outset. From market interactions with several stakeholders,we have learnt that owners of old buildings, which were initiallyHome rental aggregator NestAway, which has recently raised USD51 million from Goldman Sachs, along with a joint venture of anoted industrialist plans to diversify into creating co-living spacesgoing forward. OYO, the hospitality company, has announced plansto venture into the co-living market with its brand ‘OYO Living’ inthe latter half of 2018 and plans to enter Bengaluru, NCR, Punewith more than 35 properties and 2,000 beds. With a successfulpartnership with Embassy Group, WeWork has been able toestablish a co-working franchise model in major Indian cities andits co-living venture, WeLive, is expected to make a splash in theIndian market soon. These early trends are indicative of the othermodels which will emerge in future. Going forward, we can expect: a) Home rental networks diversifying into creating co-livingspaces b) Global co-living players venturing into the Indian market withfranchisee arrangements or partnerships with local players c) Unorganised players in the paying guest accommodationsegment learning from their mistakes and venturing into theco-living space in partnership with established operators

60%55%10RESEARCHCO-LIVING: RENT A LIFESTYLE50%Millennials as a percentage of the total Indian populationSection 245%Millennials andthe world ofplug-and-play livingof 7.4 billion, millennials account for a substantial 27% forming the largest demographic group worldwide.Millennials as a percentage of population across few countries in 2018Looking at India, with 34% of the country’spopulation within the age bracket of 18–35Millennial population (in millions)44040076121,3001,42032667years, it is THIS demographic group, orMillennials as a % of total Indian populationMillennials or ‘Generation Y’ are the population group belonging to the 18–35 years of age bracket. Of the total global populationTotal population (in %20%Indian millennials that already are, andwill continue to drive the consumptionstory across sectors, including realestate. In the context of residential real15%estate, millennials will not only drive butalso redefine the manner in which it is34%28%23%18%consumed due to their inherent need formobility, connectivity and tech-enabled10%living spaces. Creating living environments,with a millennial consumer in mind, willhenceforth become a necessity. Plug itand play with it, just like flexible officespace environments, is where the Gen Y5%housing needs are headed. As per a recentresearch, India’s millennial populationIndiaSource: Knight Frank Research, media reportsChinaUnited StatesUnited Kingdomis expected to grow from 28% of totalpopulation in 2016 to an estimated 42% ofthe total population by 2025.0%2016201720182019E 2020E 2021E 2022E 2023E 2024E 2025ESource: UN, Morgan Stanley Research, Knight Frank Research E Estimate

12RESEARCHCO-LIVING: RENT A LIFESTYLEIndian millennials account for a 47%2 share in theThe definition of ‘living’ and ‘home’ for millennialscountry’s working age population. However, not onlyFor the millennial population, job mobility is the primary priority and home ownership is secondary. Home ownership is a decision post-poned for later stages of life until they are well settled in their jobs and family life. With the median age for marriage in India climbing upfor both men and women, need for more options for rental housing for singles is increasing with the deferment of marriage. Unlike Gen X,homes are not the same emotional investments as they used to be. Rather, homes are viewed as a consumption product which suits hous-ing requirements in a particular phase of life. For students pursuing higher education, fresh graduates, single women, bachelors and doubleincome no kids (DINK) couples, homes are transitionary commodities that can be upgraded as they move on in life. A headache-free life-style choice comprising of a well-maintained rental property is how the millennial housing requirement has evolved over the last few years.Coupled with the prohibitive costs of purchasing a house in any of the three big metropolitan cities of NCR, Mumbai or Bengaluru, renting isthe only affordable option. But the demands from the rental accommodations available have grown exponentially with lifestyle changes andtechnological disruptions. Those staying in rented accommodations often have to compromise on staying closer to the workplace in orderto keep monthly rental payments low as most central locations or apartments near employment hubs have become expensive to afford inkey urban centres.the young workforce, but students enrolled in higherAnnual income of all respondents who took the surveyeducation3 form a vast group of millennials on thelookout for hassle-free rental accommodation inurban education centres where they migrate to forunder-graduation, post-graduation and doctoratestudies.To assess the end-user propensity to spendon rental housing, Knight Frank India Researchconducted an end-user survey. We uncoveredsome interesting findings from a sample size of38%More than INR 8.00 lakhs196 respondents spread across the cities of NCR,Mumbai, Bengaluru, Pune, Hyderabad, Chennai andothers. Our survey included all income groups andoccupation types as well as students. NCR with 37%saw the m

6 5 Introduction Millennials and the world of plug-and-play living Global scenario Co-living landscape in India Not just a start-up story Way forward An introduction to co-living concept, renting philosophy, evolution and characteristics Other rental models vs. co-living Types of co-

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