For Uday Lakkar, the ecstasy of landing a first job in Gurgaon, right after finishing a stint at IIM-Ahmedabad in 2009, soon turned into agony. He had a harrowing time finding decent accommodation for over a month. Reason: a "jaundiced perception" of bachelors — junkies, drunkards and sex maniacs.
Cut to August 2015. Probably singed by the insults he had to endure during his house-hunting days in Gurgaon, Lakkar cofounded CoHo, a home rental startup. It takes apartments and villas on lease, converts them into co-living hubs by furnishing and loading them with amenities such as swimming pools, Wi-Fi, laundry and the like. CoHo then rents beds to singles — students or working professionals — for long stays. While the minimum stay is six months, the monthly rent ranges from Rs 8,000 to Rs 25,000 per bed. "It’s neither a hostel nor a PG nor a serviced apartment," he says. It’s a hybrid that offers the best of all the three and provides comfort, convenience and community to residents.
Little over a year into operations, the Gurgaon-based startup has added over 750 beds, is set to touch annualised revenues of about Rs 6.5 crore, and will break even by early 2017, claims Lakkar. "In co-living, people don’t just exist, but start living."
Lakkar is not the only one chanting the virtues of co-living. While sharing an apartment has long been a rite of passage for young adults, a clutch of startups is trying to create a differentiated style of living for singles, mostly millennials.
The thinking that’s nudging entrepreneurs towards this business model goes something like this: apartment rents in big cities are high, as are the security deposits; and then there are the furnishing costs. So 20-something residents will pay a premium to live in clusters of small apartments packed with amenities and peers in similar profiles. With most of the ventures getting funded — over $51.14 million in 10 startups over last two years — the market is poised to take off, says Rishabh Lawania, founder of Xeler8, a market intelligence platform for VCs and corporates. "It is ripe for disruption."
The proposition seems so luring that even foreign startups are making their India debut. Early last month, US based rental and sharing house startup Roomi launched operations in India.
Venture capitalists are not surprised. "The rental market offers decent space for a disruptive idea like co-living," says Anil Joshi, managing partner of Unicorn India Ventures, an early-stage venture capital fund. While PGs and hostels have always been there, what is perhaps luring millennials is the new avatar of co-living: standardised and less cumbersome experience, better common facilities, opportunity to network with like-minded people and socialise, and a plugand-play kind of model. And what’s pulling entrepreneurs is a business opportunity that never existed before.
It’s probably the virtues of co-living that have helped Prafulla Mathur expand his longstay startup WudStay to 15,000 beds across six cities in under two years.
"Housing consists not only of bed and food, but also good amenities, friendly people to stay with and safety," says Mathur. Long-stay PGs, he reckons, is a $100 billion annual market in India and has largely been dominated by individual PG providers who have always taken the consumers for granted. "This is where traditional PGs are losing out."
Headquartered in Gurgaon, WudStay provides amenities such as Wi-Fi, laundry, furnishings, power backup and a common kitchen and living area; it has raised $3 million so far and offers gender-specific properties as well as for both men and women. What’s also aiding Mathur in his push to expand to other cities is an increasingly mobile population that’s migrating to cities for jobs and studies.
Another comforting factor for entrepreneurs like Mathur is the success of global counterparts in spreading communal living. While startups in Europe focused primarily on student hostels such as Students.com and Uniplaces that have been successfully raising funds — $60 million and $30 million, respectively, over the last one year — the ones in China too are not far behind. Mofang Gongyu, the Warburg Pincus-backed Shanghai rental apartment operator with an estimated 25,000 units, raised $300 million in funding in April this year, and is now reportedly worth over $1 billion. Then there’s Youke Yijia, which raised $22 million in November 2014; and Mogu Gongyu, backed by IDG Ventures China and Ping An Insurance, which raised $ $30 million that same month.
Adam Neumann — the poster boy of shared working in America whose co-working startup WeWork boasts of a startling valuation of over $16 billion — too plunged into the co-living space with WeLive this April.
A Better Alternative
Back in India, a similar experiment was rolled out in Bengaluru in March this year when Suresh Rangarajan started CoLive. The 43-year-old entrepreneur, already running a co-working hub CoWork, raised preseries A funding of over $1 million in September, manages 200 apartments, provides amenities such as swimming pool, cafeteria, games like Xbox and foosball, and claims to make annualised revenues of Rs 8 crore.
What inspired Rangarajan to wade into the co-living territory was a problem and an opportunity. The problem: most residential housing societies in the city used to treat millennials as second-citizens, existing PGs were cramped, and the residents had to do with pigeon-holed rooms and pint-sized beds, he claims.
The opportunity arising out of this problem was equally massive: Bengaluru has over 25 lakh migrants, and 60 per cent or 15 lakh are looking for shared accommodation. "That’s a mindboggling number," he says, adding that, at an average Rs 4,200 monthly rental, the opportunity in Bengaluru alone is $1 billion.
If the opportunity is massive, Rangarajan should thank the plethora of local unbranded PGs, who are fast losing consumers. Risha Gupta is one such consumer. The 25-year-old marketing executive changed her rented home thrice in a span of a year. Reason: high rentals without basic amenities like laundry, Wi-Fi and kitchen. "I felt cheated." Right from cleaning her room to toilets, Gupta was on her own. And the restrictive deadline to enter PGs — latest by 10 pm — was suffocating, especially after the humongous effort she had made to deposit eight months’ rent — Rs 1.60 lakh — as security. "There was no value for money."
Rajesh Kotta too figured that consumers were looking for a better alternative than locking up a huge sum in a security deposit. This led him to cofound Square Plums in February 2016, and he went on to raise Rs 3 crore from Indian Angel Network in August. Offering a well-furnished room with all facilities including housekeeping, kitchen, clubhouse, gym, games room, Kotta says he has roughly 50 properties in Bengaluru. "All these and more for just two months’ rent as security."
Kotta believes that what’s pushing the culture of co-living in metros is the bait of a social life: the flat comes with flatmates, and that too of a similar kind. The chances are flatmates from a similar social and economic status can enhance your social network, he feels.
For Gaurav Bhatnagar in Gurgaon, the advantage of socialising with like-minded people was the lure for shifting to CoHo. "It’s like moving into a building where you know people are friendly," says the 26-year-old, who relocated from Hyderabad to Gurgaon last year, and changed his dorm twice before shifting to CoHo. "It just takes away the awkwardness of meeting people in a big city like Gurgaon."
Bhatnagar, apart from enjoying socialising events organised by his co-living startup, eagerly waits for Gaming Nights when residents across CoHo properties form teams and compete in games like Counter-Strike and FIFA on PlayStations every week.
The rental houses also act as a hyperlocal marketing venue for brands such Pizza Hut, Foodpanda, Burger Singh, Beer Café and LensKart as residents get exclusive discounts, offers and experiential sessions from these brands.
"The idea is to have a lifestyle and not just a room with four walls," he says, adding that the freedom to relocate to any of the CoHo properties is another reason for the stickiness of the concept of community living.
But can users like Bhatnagar make the roommate sector sustainable? Can the niche develop into a mass market? The problem, as seen globally, lies in the nature of the beast: growing too fast can be dangerous.
Take, for instance, the now-defunct Campus. One of the first co-living American startups, and funded too, it shuttered its 30 co-living houses last August. In a message posted on the company website, Tom Currier, Campus’ founder, wrote that he was "unable to make Campus an economically viable business".
Back home, attracting a fair bit of funding from investors doesn’t mitigate challenges — which are galore — for entrepreneurs. The biggest one is maintaining consistent quality.
If quality levels are not maintained, says Joshi of Unicorn India Ventures, it would make the business model a bit challenging. There is opportunity to build a billion-dollar business but one need to keep the service level high, he adds.
Entrepreneurs, for their part, are aware of the tough task. Salil Agrawal, cofounder of Gurgaon-based ZiffyHomes, knows that the key to staying on course is execution. Agarwal started ZiffyHomes last May, raised undisclosed angel funding in July this year manages over 100 properties across Delhi NCR and charges rents ranging from Rs 8,000 to Rs 20,000 per month. Without a perfect amalgamation of on-ground operations and technology, the business model would be difficult to scale up, he feels, adding that maintaining customer experience is the most challenging.
What bothers Digendra Singh Rathore, cofounder of Gurgaonbased Fella Homes, is not execution but the orthodox mindset of housing societies. The house owners, he lets on, are sceptical of renting out property to bachelors due to various misplaced notions. "We haven’t solved this problem completely, but the mindset is changing slowly," says Rathore.
For Amarendra Sahu who, together with Jitendra Jadhav, cofounded Tiger Global-backed NestAway, winning the trust of owners, tenants and ppartners remains the topmost challenge. The trigger for starting NestAway last January was the trust deficit between owners and tenants, which gets pronounced through a high security deposit and a less desirable interview process that borders on biases and at times plain humiliation.
"Sharing is both an economic reality and an extended experience of adolescent life," says Sahu. The Bengaluru-based startup has raised $43.2 million so far, counts marquee investors like Tiger Global and IDG Ventures among its backers, and has over 5,000 properties listed across four cities.
While other entrepreneurs might be grappling with the execution and trust part of the business, Mukul Pasricha is struggling with something fundamental: behaviour of the residents.
Late-night parties, misuse of internet and delay in payments are some of the challenges in this segment, says the 28-year-old cofounder of Gurgaon-based bootstrapped venture Spring House, which also offers short stays — 5 to 30 days — to visiting entrepreneurs .
While conceding that the concept in India has a long way to go compared with the US and China, Pasricha maintains that the future of co-living in the country does appear promising.
Lawania of Xeler8 too sounds optimistic, but has a word of caution. "There’s enough room to manoeuvre," he says. "But do watch your step, mate."