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Second Wave of COVID-19: Will co-living segment recover?

With most organisations following the work-from-home or the hybrid model, migration has dropped significantly, impacting the co-living segment

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better interiors_16_49884471

The driver for the co-living segment is usually the young workforce who  shore up to metro cities after completing graduation. A segment of higher education students enrol themselves for student housing – another form of co-living.

Student housing and co-living got prominence in the last few years when Generation Y and Z drove shared economy and commerce concepts. It gave importance to several co-living operators like Zolo Stays, CoHo, OYO Life, NestAway, Colive, Hoolive, Stanza Living, and many more. However, the concept of Shared Economy got severely tested during the COVID-19 pandemic.

Work-from-Home and hybrid working became common and had an impact on the occupancy in workplaces and co-living facilities. Uncertain economic conditions, loss of jobs, work from home, and migrants returning to their respective hometowns in the wake of the pandemic brought the fledgling co-living sector to a grinding halt.

By the end of 2020, occupancy was restored to about 45 to 50% in most co-living facilities. 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.

A recent report by The HouseMonk pegged the market size for co-living (excluding student/senior housing) in India at $273 million in 2019, which dropped 46 percent to $126 million in 2020. The average rent per tenant/per month fell 15 percent to $150 in 2020 from $175 in 2019.

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A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

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There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

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Tech-enabled co-living start-up Zolostays, which raised $56 million in Series C funding in July, crossed 50 % occupancy in December 2020 instead of 80% occupancy at pre-Covid level, after hitting an all-time low in July. NoBroker.com, which partnered with OYO LIFE in August to offer co-living services, saw demand dip by 62 % for PG/co-living spaces versus pre-Covid levels and is currently down by 49 %.

Migration to urban areas is the biggest driver of demand for co-living spaces. India has witnessed around 35-40 million sqft of Grade-A office absorption every year till 2019. With a space standard of 100 sq ft person, this amounts to about 3.5 to 4 lakh employee occupancy, out of which about 50,000 t0 60,000 are freshers. It’s the freshers who continue shuffling jobs and cities to support the demand for co-living alive. The expected office absorption is expected to be in the range of 25-30 million square feet in the current scenario.

However, in a departure from the past, in most organizations, employees this year would either follow work-from-home or through a hybrid model.

As a result, migration to cities is likely to drop significantly. There is a silver lining, though. The fact is that whenever migration to cities takes place, the preference will be for safe and hygienic accommodation. Co-living in prime areas that maintain the highest safety standards will be preferred over the typical mom- and-pop paying guest and rundown sharing accommodations.

Innovation is taking place in co-living structures and models. The space design is not getting more contemporary and suitable to the lifestyle of Gen Y and Z. Some critical needs of today's young professionals are ultra-fast-reliable WiFi, the latest technology-enabled home, productive workspaces, safe and comfortable living, and working environments.

Access to local events, fun, and leisure opportunities, seamless transportation options, lower cost-of-living and the complexity of day-to-day life, opportunities to connect with others for business and social purposes also excite the youth.

Today's youth also move from job to job and from city to city. They look for brands that they trust to be present in all metros where they travel. Thus, some CoLiv operators are exploring ideas with payment structure from Rent Based to Membership Based.

Co-living provides value-for-money solutions to young urban migrants who face a challenge in finding accommodation in a metro city, especially in housing societies. Co-living in India is expected to gain strength and momentum as office occupancy normalises by 2022.

Co-living has a long-term potential in Metro cities. By the end of the current year, the market will see a resurgence of a few strong players with a larger footprint and unique business models. The sector will also witness an increasing adoption of technology, innovative pricing, and a better-staying experience. As every challenge also brings some opportunity, the industry will see a turnaround and transformation in the times to come.

 
Subhankar Mitra
first published: Apr 23, 2021 11:59 am

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