Co-living companies tap revenue streams
3 min read 14 Oct 2020, 06:20 AM ISTZoloStays, which runs 527 properties with 38,000 beds, is setting up a new vertical where it will partner real estate developers to build co-living facilities with an aim to sell to investors.
PremiumCo-living startups are pursuing new revenue streams to diversify their business, emerging from a protracted coronavirus-induced lockdown when they had to renegotiate rentals, invoke force majeure clauses and face low occupancies. According to co-living service providers, demand is returning, but the home rental market has seen massive disruption with occupancy levels staying below pre-covid levels.
ZoloStays, which runs 527 properties with 38,000 beds, is setting up a new vertical where it will partner real estate developers to build co-living facilities with an aim to sell to investors.
“We will get involved at the land stage and offer developers the design and technology. They will be designed as co-living projects and sold to investors who can earn higher yield. We are planning such collaborations for projects in Pune and Chennai," Nikhil Sikri, co-founder and CEO of ZoloStays, said. Zolo’s first premium product ‘Red Carpet’ will go live in Bengaluru soon.
Sikri said while demand is back to pre-covid levels with many fresh joinees returning to cities, it is only by January-February that occupancy should reach normalcy.
The pandemic has also sparked two big shifts in the business. Asset owners are now willing to share revenues with co-living operators, unlike the fixed rental payment model earlier and rents have fallen by 15-25% across cities.
Reverse migration, which emerged as professionals returned to their hometowns during the lockdown, has prompted Bengaluru-based Nestaway to look at managing rental homes of owners in tier-II cities and outskirts of tier-I cities through a franchise model to cater to growing needs in these locations.
“…As part of this new model, the independent property managers would have access to the same product, technology and know-how as our existing on-roll property managers," Amarendra Sahu, NestAway’s co-founder and CEO.
Sahu said since July, there has been a surge in owner requests from smaller cities asking for their homes to be managed, which it would turn down earlier on grounds of constraints in servicing these locations.
“…With the changing market dynamics, Nestaway will also be launching a product offering to solely cater to this," he said.
Another shift in the rental market has been the tenant base which was earlier centred around central business districts and metros, now moving to distant suburbs and nearby smaller cities as rents are cheaper and they do not have to commute to work daily.
Co-living startup Guesture is offering a new product called ‘Quarters by Guesture’ which will service needs of industrial and blue-collar workers and may even be a part of the government’s rental housing scheme. “This will be affordable rental housing. We are planning the first property in Peenya, close to the industrial district, in Bengaluru, and one each in Kolar and Rajasthan," said founder Sriram Chitturi.
Anindya Dutta, MD and co-founder, Stanza Living, said the crisis has accelerated talks with educational institutes and driven a 10X jump in collaboration for both on-campus facility management and off-campus capacity support.
“We’ve doubled our live inventory in the past 6-8 months and expanded into tier-II markets like Vizag, Udupi and Vidyanagar. We’ve entered these cities on the back of strong market demand and are already recording pre-bookings from there. We are further building out capacity in our existing markets," Dutta said.
Stanza Living recently acquired Yourshell, a hyperlocal student housing business based in Delhi.
The shake-up in the sector is also likely to spur consolidation, where larger, well-funded co-living startups may buy out their smaller counterparts.
Ankit Gupta, CEO, Frontier & OYO Workspaces said it recently launched a 20% discount on monthly rent, starting from the fourth month of the long-term stay.
“With lowering rental yields, we are working with our asset partners in a revenue sharing model instead of traditional fixed lease. Our value-added services and multi-brand partnerships ensure taking care of laundry woes through our partners such as PickyMyLaundry, DhobiLocker and Ohmywash, access to shared mobility with YULU Bikes," Gupta said.
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