Human beings are hardwired to live and thrive in closed knit communities. We see it in our familial patterns, our social circle and also, in the way we've chosen to live since time immemorial. The concept of living in communes, with your neighbours just a mere call away dates back to the time humankind began socialising. Through every century, as the political and anthropological face of the human race changed, community living has evolved too. What started as basic hutments and communes, slowly turned into far more sophisticated setups like co-housing settlements. Created from the same social fabric, the idea of co-living is beginning to gain momentum. Its predecessors like Paying Guest Apartments, Shared Student Housing and even Co-Op housing have all pitched in, honing the rough edges of co-living, making it a viable option for the young Millenials, whose needs are more fluid and their patience thinner.

But more importantly, let's also ask ourselves this - can the co-living sphere also double as a viable investment option? Is this millennial hot pick an emerging new asset class that will serve both the digital nomads and the real estate stakeholders? While, some are sceptical of what it might do to potential homebuyers - having ready-made homes at their disposal without burning a hole in their pockets, some think this is the revival the sector needs.

This article attempts to zoom into this phenomenon and take a microscopic look at what co-living can mean for the entirety of Indian realty, looking past the fads and straight into the facts.

CO-LIVING - OLD WINE IN A NEW BOTTLE?

The common question that seems to follow co-living is, what is it? and how is it different from what we were already doing? To many, it might seem like rehashing the age-old concept of living together to skrimp on expenses, by sharing the living costs, with a bonus of friendly neighbours. While in some parts, that might be true, co-living is more than just slumming it out together. Co-living is an idea that satiates the youths' need to have homes that fulfil them, without burning a hole in their pockets. Gone are the days when young professionals, students, or fresh graduates were forced to live in cramped houses, for the lack of funds and space. Co-living lets them live their full lives, within their financial budget.

Birthed and honed ever since, co-living is an offspring of co-housing. Co-housing, as we know it first began in the late 1960s, in Denmark, where a community of people lived in individual home units in a building, while sharing common spaces like an entertainment area, a living room or sometimes even the kitchen. While culturally and politically, they stemmed from socialism, it made the matter of affordable housing realistic and accessible. Co-living spaces function similarly. However, there have been remarkable additions to the setup that helps elevate it to make it the ultimate definition of modern housing.

Co-Living spaces today are homes managed by a company or real estate players, eliminating all contact between the tenant and the landlord. Residents have their own furnished private living quarters and bathrooms (typically) but share common spaces like living, cooking and recreational areas. Based on the idea of a shared economy, all common expenses are split evenly amongst the residents. The rent a resident pays becomes more economical, without having to compromise on the quality of living or space. Co-living spaces are mostly directed towards young professionals and millennials who yearn for a full life, without having to compromise on their standards of living despite their limited budget. Given the fast-paced and dynamic nature of the job market too, professionals are shy of making a huge real estate commitment - be it signing an 11-month rental lease, or buying a home. Co-living spaces pose as the perfect crash pad for such employees, who may have to shift cities, at a moment's notice.

This is a generation that refuses to compromise on style, and comfort, be whatever the situation. Simply making do, is no longer an option. For a generation that is full of energy, innovation and zeal, co-living spaces would not only be complementary, but it would also be ideal.

Here are some notable departures from the usual paying guest system that a co-living space offers a resident, and also amplifies their living experience.

• 1. Unlike PGs or even rental apartments, Co-living spaces don't tie down residents with a rigid lock-in period, before which they can't move out, should they choose to.
• 2. Similarly, co-living spaces also don't demand a high-security deposit off residents, making them a popular option within young professionals and fresh graduates.
• 3. Co-living spaces offer fully furnished rooms, with more than just the basic amenities. Most PGs are known to provide scant furnishings, and rental apartments often don't come with anything at all.
• 4. In most Co-living spaces, residents don't have to shell out extra cash for utility bills like electricity, or cable, on top of their rent. Or in other cases, the expense is built into their rent, so no additional money has to be paid, saving extra expenses during the month. More often than not, this is not the case in a PG or a rented apartment.
• 5. Many PGs don't offer food or packed food services. Residents are then left scouring for an additional service. Co-living spaces offer food, in either a mess type setup or offer packed food. Unlike Co-living spaces, PGs also have restrictions on cooking food inside.
• 6. In a co-living space, residents are free from the constant supervision of their landlord or warder. As long as they don't inflict any damage to the property or cause any harm to their fellow residents, residents are free to do what they please.
• 7. Similarly, there are no restrictions placed on residents, in co-living spaces. PGs often make banal dictations on when residents should be inside the house or when lights must go off, and who can visit the residents.
• 8. One of the biggest salient features of co-living space is their lack of compromise on safety and security. Starting from biometric entry systems, to 24*7 security on the ground, co-living spaces are particular about their residents' safety. This puts residents' and their families' minds at ease.

• 9. In a PG or a rental apartment, a lot of amenities - both basic, and luxurious, might not be available. In a co-living space, residents have access to uninterrupted WiFi, television, a range of electronic gadgets and recreational options, amongst other things.
• 10. Most importantly, co-living spaces strike the right balance between community living and privacy, affording the residents a choice between spending time alone in total silence or with their other mates, in the common area. Most PGs and Rented Apartments can't boast of the same, owing to the number of people residing in one flat, or because of the lack of space.

The Co-Living industry in India is less than 5 years old, and yet economic experts predict its long and healthy performance. Several Co-Living companies and startups have now mushroomed across major metro cities and educational hubs across the country, including Mumbai, New Delhi, Bengaluru and Pune. Interestingly, tier-two cities aren't entirely left out of the equation either, with setups like 'Home for Artists' coming up in Jaipur and Udaipur.

STARTUPS CASHING IN ON THE MILLENNIAL DILEMMA

According to the experts' forecast, the co-living sector is expected to rise at a commendable compound annual growth rate (CAGR) of about 17%, in the next five years. The start-up culture has found a conducive and nourishing home, here in India and the phenomenon of co-living has taken the start-up clique by storm, with several big operators emerging over the last few years. Currently, the sector is roughly evaluated to value about $120 million, which indicates a healthy cash inflow. Finance gurus expect the sector to touch the $2 billion mark by 2022, which shows a remarkable markup, with a span of just two years. The predicted growth chart banks on the growing demand from the sector's biggest target audience, and the increase in the number of players in the sector who are catering these demands as well. While the sector is brimming over with potential, there are about just 10 key players in the current market. The list includes CoHo, CoLive, Zolo Stays, Oyo Life, Stay Abode, Square Plums, Stanza and SimplyGuest to name some. Most of these operators came into being within the time frame of 2015 to 2018, with some starting fresh, while others branching out from parent companies like Oyo or Nestaway.

Through the course of the next two years, the sector is bound to draw a lot more operators, it will be interesting to see how the balance between the demand and supply will play out.

However, what works as the sector's unfailing backbone is the steady flow of organised funding. Almost all of these co-living ventures are backed by stable investors, proving once again that the potential of the sector is a reliable investment option.

In 2018, HDFC acquired a 25% stake in the co-living startup Good Host Spaces Pvt LTD, giving it an additional boost to expand. Records show that in 2019 alone, seven of these co-living ventures received funding from investors. These numbers are evidence that the co-living model is viable, and here to stay and just about everyone is rushing to be a part of the market, in whichever way possible - be it investor, or the proprietor.

OPPORTUNITY STRIKES FOR REALTY BIGWIGS

However, what can potentially change the game, is the entry of real estate developers into the segment. India's realty landscape saw some rough terrain all through 2019, but things are slowly looking up for the sector in the new year. While not in perfect shipshape, the advent of 2020 and the Finance Minister's new budget made for a promising start for Indian real estate, with the focus on affordable housing still persistent.

Renowned developers are slowly inching towards broadening their supply to the market, by venturing into the co-living segment. Tripling as an investment, a move to diversify risks and as a fresh entrepreneurial venture, this move seems to hold a lot of promise. Not only does it cement the co-living segment's potential to grow and provide, but it also means that developers are slowly beginning to crawl out of the crushing cash crunch that had befallen them - paralysing all their projects, and other functions, by capitalizing on the growing demand for co-living spaces, and the potential rental yield.

• Realty giants like Lodha and Godrej have heavily invested in the co-living operator Housr, in April 2019. The founder of Housr also added they would be open to collaborating with the developers in the future, going one step ahead of basic funding
• Real Estate Developer Purvanaka ventured into the co-living segment on their own, in August 2019
• Co-Living operator CoLive received a chunk of its funding from the Kolkata based real estate group, Sallarpuria Sattva Group

Experts have pegged down a rental yield of almost 8 to 11% that the co-living segment is likely to generate, which is a far cry from the more conservative 1 to 3%, regular residential properties generate. This is good news even for homebuyers and owners, who are wary of low rental income and are looking to optimize their investment opportunities, with reliable real estate brands.

CO-LIVING MODELS - THE INVESTOR'S PICKS

Lets now slowly veer the conversation away from the co-living segment's target audience, to who might participate in providing these homes. An economy is a cycle of giving and takes - investors who are pumping in the funds, and infrastructure, and customers who are the prime consumers, keeping the cycle of the cash flow going. While we have addressed how the co-living segment services the consumers, in varied forms, lets now see what the co-living model holds in store for its investors - be it individual homebuyers, or multimillionaire corporations.

The business model of the co-living spaces is essential in attracting investors to pitching to them to contribute. Experts have identified three viable models that work effectively to drum up business and generate the highest revenue possible.

1) MODEL 1 - Lease and Operate

This is one of the most popular models, given its easy attachment aspect. In this model, a co-living operator leases residential units, or an entire building from a homeowner/property owner and then subleases individual rooms or flat units to its customers. The transactional arrangement between the co-living business operator and the landlord is either a fixed lease rental or a shared revenue plan that spans over 3 to 9 years. Added expenses of up-gradation, changes in the structure are to be borne by the co-living operator.

The benefits of such an arrangement are that it minimises the net cost borne by the operator, and the revenue too, is shared by the operator and the investor, which is a bonus for all parties involved.

2) MODEL 2 - Management Contract Model

This model is slightly similar to the Lease and Operate model. This model involves an agreement between operators, and the investors or the property owners, who allow the co-living company to use their premises for their co-living facilities, but the responsibility of the upkeep of the property lies with the property owner. The operator acts as a custodian and in return gets a commission for their service. In such an arrangement, the tenants sign a direct lease agreement with the property owner, through the operator. This would mean an improved quality of accommodation and would solidify the lease agreement further, given that it's between the tenant and the direct owner. However, one possible drawback could be the lack of initiative taken by property owners, when it comes to repairs and up-gradations.

3) MODEL 3 - Franchise Model

This particular model works on the traditional values of franchising. This would entail an unorganized PG, hostel or even a property owner begetting a co-living operator's brand name and endorsement and then running their co-living service, as a franchisee. In this arrangement, the franchisee gets access to all technological benefits, marketing superiority, staff training and vendor reach associated with any organized co-living sector. This model is apt for developers loaded with unsold inventory as it provides them with an alternative platform to generate higher returns while still retaining their ownership. This would also help other PG and hostels better themselves and offer services that are at par with international co-living spaces, and draw more customers and tenants.

CAN CO-LIVING SPACES MAKE A CASE FOR BEING THE NEXT BIG THING FOR INVESTMENTS IN REAL ESTATE?

Apart from these three concrete ones, experts are privy to other smaller, experimental co-living models that have mushroomed across cities in India, but they are yet to solidify their profitability and sustainability. But based on these three models alone, it is descriptively established that the co-living segment has much to offer to homebuyers, and developers alike - not living them out of the business ecosystem.

For developers, the benefit is apparent - here is an option for them to lease out their unsold inventory, finally loosening the inventory and generating a steady stream of revenue. Apart from that, developers who choose to venture into the field in a way of starting a new co-living company, also act out of a place of risk diversification.

However, our focus is now on the homeowners - working professionals who have saved just enough to invest in a second property. Why would investing in a home that can double as a co-living apartment be a good move, investment-wise? Let's have a look.

• High Rental Income - If an individual leases out their house to a co-living operator, it guarantees them a high rental yield uniformly, which is something regular leasing out may not do. A co-living operator may put up 2 to 3 tenants in one housing unit, which would up the rental income the homeowner would beget, as opposed to renting the house out to a regular family.
• Steady Revenue - Another bonus is the guarantee of having a steady income from your investment, in the form of the co-living space. The operator would ensure that your home is never left unoccupied, given the demand for co-living spaces in the market, presently. It would eliminate the threat of sudden vacancies, hence dip in income.
• No Tenant Replacement Hassle - As a homeowner renting out their apartment, one of the biggest causes for concern is the sudden departure of your tenant. Not only does it upset your regular cycle, but it also provides the added pressure of finding an immediate replacement, which involves heavy vetting, bargaining and paperwork. Should you choose to lease your apartment out to a co-living operator, the onus of finding a replacement for another tenant does not fall on you, and neither does a vacancy threaten your income.
• Minimal Damages Inflicted - A constant worry while renting out an apartment is the wear and tear that will be inflicted by your tenants. However, if merged with a co-living operator, your home will be spared the excessive brunt of living damages, seeing as operators impose a strict anti-damages restriction and penalize heavily for any harm caused to the property, thereby discouraging tenants from being careless.

By leasing your home to a co-living operative, you are stopping your real estate asset from becoming a dead investment. One might argue that natural renting of property is an option too, however, signing up with a co-working space makes for a more dynamic investment opportunity. While the segment is still ironing out the creases and kinks, in the form of seasonal occupancy and high operational costs, the potential in this industry is undeniable. By betting on it at its nascent stage, we can witness its bludgeoning growth and be a part of its growth story, while also making ourselves a comfortable chunk of revenue.