How will COVID-19 impact the co-living segment in India?


While the need for social distancing following the Coronavirus pandemic may have adversely impacted co-living operators, experts are hopeful that the segment will be first to bounce back

Among the many real estate segments that have been affected by the COVID-19 pandemic in India, is the co-living segment. As many offices are now forced to allow remote working, people have gone back to their hometowns, to work from the comfort of their homes. With major employment hubs, including Noida, Mumbai and Gurugram, witnessing a surge in Coronavirus cases, many corporate houses have extended their work-from-home policies till December 2020. In this situation, the future of co-living looks bleak, as there is no certainty over when demand will see an uptick. However, experts are hopeful that the co-living segment will be first to bounce back, when offices reopen once the pandemic is under control and people start looking for cleaner and safer facilities to live in.

 

How will COVID-19 impact the co-living segment in India?

 

How COVID-19 is impacting the co-living segment

According to a report by Ernst and Young, the student housing/co-living segment may consolidate in the next few months, with some smaller operators exiting, resulting in stronger operators with sustainable financial and operational models. According to some estimates, co-living facilities are currently operating at 20%-30% occupancy and the scenario is only expected to improve, once the Coronavirus pandemic subsides completely or a vaccine is found. Going forward, facility management costs may increase marginally, due to increased sanitation and hygiene requirements, while social distancing may result in 15%-20% capacity reduction. Ankit Gupta, SVP and COO of OYO, points out that co-living operators will have to upgrade their co-living units. For example, OYO, he says, has come up with a ‘zero-touch’ policy to ensure customer safety.

Talking about the demand side in the co-living segment during a webinar with Housing.com, Deepak Anand, CEO and co-founder of Housr, said, “The preferences of people who would like to share their room, will change. They would prefer to stay in a separate room, irrespective of its size. So, the facilities will have to be ready for it.” Anand adds that work-from-home would still mean that people would prefer to stay in proximity to the office and the demand may come from consumers who are looking for options that are work-from-home-compliant.

 

Will co-living rentals increase due to COVID-19?

According to Anand, there are rare chances that the rentals might increase but this depends on the consumer’s choice and whether he would prefer to pay 20%-30% more for safety and hygiene standards, as compared to a regular paying guest accommodation.

According to Uday Lakkar, founder and CEO, CoHo, “In the short-term there will be a downward blip, since the occupancy is less and demand is low. However, in the medium-term (three-four months), there will be an upward trend in the market.”

 

Impact of the Coronavirus on co-living business models

As occupancy levels remain low right now, there is a lot of uncertainty over whether the co-living business model will be sustainable in the new normal. Experts opine that going forward, there will be a lot of partnerships in the segment, where the risk participation will be throughout the value chain, including the operator, property owner, developer, etc. They also add that business models may change, where the operators may look for new lease agreements and commitments to fulfill.

Features such as cleanliness, hygiene, etc., which were ‘good-to-have’ earlier, will become ‘must haves’ and people will appreciate such facilities. Operators will also have to invest in several things, to bring back demand in the new normal. This may include improvements in quality and building infrastructure, offering flexibility vis-a-via payments and offering a comfortable environment to stay in.

 

Unsold inventory to cater to co-living supply?

The problem of unsold inventory that the real estate industry is grappling with, can prove to be a blessing in disguise for the co-living sector, on the supply-side. “In terms of efficiency and cost-effectiveness, co-living spaces will work out as one of the possible solutions to unsold inventory, as long as you understand the ‘new normal’ of a COVID-19 world. As long as appropriate social distancing and other norms are followed, co-living can emerge as a viable solution to unsold inventory,” says Niranjan Hiranandani, president, NAREDCO.

 

FAQs

What will be the impact of COVID-19 on co-living?

Experts maintain that the co-living segment could witness consolidation due to the COVID-19 pandemic and resultant drop in customers. On the other hand, tenants who were considering PG or student housing accommodation, may now consider opting for co-living spaces.

Will co-living rentals increase due to Coronavirus?

Increase in rentals will depend on the consumers’ choice and whether he is willing to pay more for a separate room and for safety and hygiene.

 

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