Covid-19 crisis takes a toll on co-living biz

THE SHAKE-UP IN THE CO-LIVING SPACE IS ALSO LIKELY TO SPUR CONSOLIDATION

nBENGALURU: The Covid-19 crisis has deeply impacted the co-living industry, upending rents and rental agreements, community spaces, profit margins and expansion plans.

The last three months have seen a drastic drop in demand for co-living facilities across cities, as students and young working professionals returned home during the lockdown

It remains unclear when business will return to normal.

Co-living includes the broad swathe of shared accommodation, from flat-share to entire buildings that are fully serviced, for students, families and working professionals.

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, said industry experts.

Ismail Khan, chief business officer, Nestaway, a managed rental startup said force majeure clauses have been invoked in many of its contracts with property owners.

Many startups, who take a property on lease and then rent it out to co-living sharers, have renegotiated their contracts with owners. While most owners have agreed to temporarily end fixed rental payments by these startups, some have even waived minimum rental guarantees for 3 or 6 months.

“Organic demand, from students and migrants, is taking a hit. Before the lockdown, we were predicting a 5x to 6x growth in demand for the year, but that has now slowed. A lot of the migrant population has moved back to their hometowns, and some 60-70% of our users are working from home,” Khan said.

Anindya Dutta, MD, Stanza Living said other than rental discounts, it has renegotiated rent obligations, in some cases for 12-18 months, with landlords assuming tenants will begin to return over the next two months. “Once things normalise, we believe the demand for branded managed accommodation will rise because of hygiene and sanitation factors,” Dutta said.

Minest, which has been incubated by Shearwater Ventures and has three facilities in Gurugram and Delhi, is also remodeling rental contracts.

Rajeev Bairathi, CEO and MD, Shearwater said co-living was always a high-volume, low-margin business, but both volumes and margins are impacted.