Should you rent or co-live?

You may share your cab and workspace with a stranger. But would you share your house with a stranger too? Co-living is a new trend that is gaining traction among millennials, including young students and professionals, who want a community-centred living environment and not just simple plain-vanilla rented or shared accommodation.

Taking a leaf out of the old structure of 'mess' and 'hostel', co-living seeks to aim for a balance between privacy in living and social contact between residents. Given the high rents for individual accommodation and lack of family support for those who move from smaller towns to metros, the traditional rental arrangement pales in comparison. DNA Money discusses the pros and cons of co-living versus traditional renting.

Living alone or with strangers

While it is largely major cities like Bengaluru, Mumbai, Gurugram and Pune that began promoting this concept, the demand for co-living spaces is also gradually percolating into Tier 2 cities like Jaipur and Lucknow, where both working millennials and students are increasingly opting for co-living spaces, according to ANAROCK.

"Co-living is much more than a mere bed-and-breakfast deal. These are fully-furnished homes where the privacy of tenants is respected. Private bedrooms with access to common shared areas like the kitchen and living room are the norm. Such spaces offer convenience and an entirely new lifestyle for young professionals – most often bachelors and singles - who are not keen to change cities because of their work," says Anuj Puri, Chairman, ANAROCK Property Consultants.

Young professionals' main concern is finding the right accommodation. For them, co-living is an ideal solution and conventional paying guest facilities and hostels are gradually giving way to this more sophisticated way of living in a less inhibited and restrictive environment with ample opportunities to mingle.

Current trends indicate that this new accommodation is more popular with the young and unmarried millennials, aged between 20-30 years. Professionals who don't live with their families in the city of employment are also increasingly considering this option. It can safely be stated that the aversion to isolation and loneliness are driving the demand for co-living, points out Puri.

Knight Frank India's survey on co-living observes that 72% of millennials (18 – 23 years) have given co-living spaces a thumbs-up and over 55% respondents in the age group of 18 – 35 years are willing to rent co-living spaces. The survey was undertaken across top cities of India, including Mumbai, Bengaluru, Pune, Hyderabad and NCR and received responses from a cross-section of people between the ages of 18 – 40 years of age.

The survey observes that close to 40% of all respondents are most comfortable in paying between Rs 1.2 lakh to Rs 1.8 lakh per annum towards rental housing in key cities of India. The sweet spot for rentals, thus, remains at a monthly outflow of Rs 10,000 to Rs 15,000.

More than just sharing a house

When it comes to families, renting is obviously the only choice available. While there are players offering rented furnished homes for families like Oyo Living, co-living is not really an option for those with families. But the good old renting has many other benefits even for individuals.

"The social life point being talked about co-living is a myth. Today, working professionals have 12-14 hours work lives including travel. They come back home to eat and sleep. This is happening for five days a week. Where is the time for socialising and talking to people in the house? Even young professionals and students hardly talk with family members. So, this co-living thing is just a new term for people staying together because of budget constraints," says Pradeep Mehta, a Mumbai-based real estate broker.

He added that most co-living opportunities are coming up in locations which are far off. "People don't just select the home to rent or co-live. Its all about location. Everything else gets structured around that. If somebody wants to live in Juhu, would you offer them something in Thane? Messes, hostels and the flatmate concept have been around for a long time. So, co-living is nothing new. In fact, in many places, the security deposit and rent was so high that automatically you needed a 'mahagathbandhan' between four or five like-minded tenants. But, the location is everything," Mehta quips.

But co-living advocates feel that this arrangement is much more than just costs. Shishir Baijal, chairman and managing director, Knight Frank India says: "Co-living aims to create a community-centered living environment that not only provides privacy in living arrangements but also promotes social contact through community spaces and programs. As an asset class, the biggest driving force behind the rising popularity of co-living spaces are young renters moving to new cities, who are looking for easy access and reasonably priced rental accommodation. Though the concept is novel, it's here to stay, as Indian millennials currently account for 34% of the total population. This is expected to increase to 42% by 2025."

While informal co-living has always existed, start-ups such as Oyo Living, Nestaway, CoHo Living, etc, bring a more professional and organised way of catering to the accommodation needs of new-age millennials. In fact, a slew of start-ups is now betting big on this new way of living, heavily backed by investors such as Goldman Sachs, Sequoia Capital, etc.

Do note that renting arrangement does not depend on any service provider. The tenant and the landlord enter into an agreement for 11 months. So, there is nobody else apart from the broker. But, the co-living concept has a service provider.

For instance, organised players operating in co-living space offer verification, rental default guarantee, move-in and move-out management, professional maintenance and documentation benefits. These are not available in traditional renting or shared accommodation arrangements and that is why co-living, even if a tad expensive, continues to draw millenials who want a plug-in & plug-out rental life.

Challenges to co-living

But like most new concepts, co-living is not without its own challenges, says Puri. Chief among these is the high rental values of co-living spaces in comparison to the traditional formats of PGs and hostels. The rentals involved are simply not affordable for large chunks of migrating population, or sustainable in the long run for those who are eventually looking to settle down with their families.

"Not everyone has been able to make a go of co-living plays, and a handful of outfits have already had to shut operations,'' he says.

Like renting furniture, co-living is a good initial option for those migrating to a new city. Once they settle down and start a family in the city, they prefer the more conventional route of renting or even buying an apartment. In the 18-23 years age bracket, 72% were willing to consider co-living spaces as an option for accommodation, while in the age bracket of 24-29 years, 56% respondents were inclined to consider this option, shows the Knight Frank India's survey. Proximity to work and social infrastructure remained a top priority for millennials while selecting a location while only 5% gave importance to rental costs.

PREFERRED BY YOUNGSTERS, STUDENTS

• Co-living spaces are fully-furnished homes with private bedrooms and access to common shared areas like kitchen and living room areas
   
• It works in locations which are close to offices, which may be otherwise too expensive for a single person to rent
   
• Organised players in the co-living space do provide service, unlike traditional shared accommodation, but this can again push up cost