Mark Twain once famously said: “Buy land, they’re not making it anymore.” Real estate is one of our most scarce resources. As per IBEF’s Real Estate Report (November 2020), the real estate sector in India is expected to reach US $ 1 trillion by 2030. By 2025, it will contribute 13 percent to the country’s GDP.
The residential segment contributes nearly 80 percent of the real estate sector and the demand concentrated in metro cities constantly outmatches supply since India’s urban housing pyramid is a skewed one with the largest proportion of the population being under-served due to issues of affordability.
The metro cities in India have witnessed rapid growth in-migration, which has put considerable pressure on the existing rental housing set-up which itself was not historically designed in order to cater to the demand. With more millennials entering the workforce and contributing towards a major proportion of the population, their lifestyle choices will contribute towards a greater need for organised rental housing.
The number of Indians living in urban areas is expected to reach 525 millions by 2025. Cushman & Wakefield’s research on coliving 2021 suggests that the demand by singles living on rent shall grow from 1.97 millions in 2019 to 2.61 millions by 2025 in the top 8 cities of India.
With the median age of 29 (World Population Prospects 2020), the workforce of India today is on a continuous move and does not prefer compromising on their living standards.
Frequently Asked Questions
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According to Deloitte Global Millennial Survey 2018, the average tenure of millennials in their job is three years and most of them prefer to travel across cities for work.
The pandemic has compelled people to prefer places that offer greater safety along with fully furnished facilities. The lockdown induced a strong need to find new ways for building and sustaining human connections than ever before. In consideration to the extensive offerings that co-living spaces and shared accommodations offer, along with ensuring enhanced safety protocols, this alternative will gradually become a necessity for modern migrants as they adjust and familiarize themselves with the new normal.
Ris of co-living - The future of Indian Real Estate
The migrant workforce and students availed shared rental accommodation options in the past, but the current standard of accommodation being offered are not well suited to the needs of the modern millennial.
The typical residential floor plans have been around for ages and were designed for families but not specifically single individuals. Purpose designed and built facilities specifically for individuals do not exist yet in the country and while all the operators are currently running their business on stock converted from existing buildings, most of these facilities are small, sub-standard and lack the amenities required.
In other words, co-living is shaping to be the new age residential offering that is designed not just for the needs of the migrant-single individual but rather the changing needs catering to different life cycle stages of an individual.
Future of co-living in India – Why it is here to stayThe plights of the traditional unorganised and informal co-living sector are plenty as these informal facilities have a rigid structure for their residents with limited scope for any modifications or relaxations. Lack of standardisation, limited options and no rules governing informal accommodations has also meant that this has largely been an operator/landlord driven market with negligible bargaining power of the residents.
The co-living ecosystem offers low entry cost with flexible deposits, no brokerage and affordable rentals in highly desirable housing markets. It is free of gender based discriminations providing common connecting ingredients to residents. Also, it offers flexibility and convenience by reducing commute times while providing easy access to social and physical infrastructure.
The future of co-living in India rests on three crucial factors –
Growth driver of shared economy in India – Millennials are inevitably the driving force behind India’s growth. 34 percent of the population is in the 18-37 years age group with a total of 36.6 million students. At 440 million, India is home to the largest millennial population globally.
Traffic congestion in metro cities – The presence of the three Indian cities in the top 10 of the TomTom Traffic Index (January 2021) is an indication of the traffic congestion that the metros suffer. It goes without saying, in today’s fast-moving world, commute time is the most crucial Influencing factor.
Millennial Economics of Buy vs Rent – While demand in the high end and luxury segment is largely driven by cash rich buyers and NRIs/investors, the mid and affordable segment projects witnessed a spike in demand due to increased interest among end users in the 25-40 years age group to invest in residential properties. This has been a perceptible shift from the trend till last year when a major proportion of this population were reluctant to invest in property since pocket friendly options were mostly available at outskirt locations.
The COVID-19 pandemic has brought about a fresh appreciation for the need for more personal space. The pandemic forced employees to work from home during the lockdown which has led to rise in residential sales across the nation. This was increasingly true for first-time buyers as well which reflected in the fact that apartments priced over Rs 5 mn (Rs 50 lakh) had a larger share of sales at 57 percent compared to apartments priced under Rs 5 mn (Rs 50 lakh) at 43 percent during H2 2020.Although affordability has improved over the years across all markets with income growing and housing prices correcting, it is still not sustainable for a millennial to buy the house they need to live in, in order to be in proximity to their workplaces. Take Bengaluru for example.
In the four major business parks in prime locations across the city, the EMI for a 2 BHK residential apartment is nearly double the amount of rent that one can charge today. Also, the ticket size for such residential development is out of reach for the modern millennial as the price appreciation on these locations has hit a glass ceiling.While it is true that the buying behaviour of millennials has evolved with the pandemic resulting in more millennials wanting to purchase homes, the purchase power is still nowhere at par with the prices. The millennials are still not able to buy the houses they need to live in. Even as an investment opportunity, the introduction of REITs in the country offer much more flexible options that present the millennials with a better option.