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
The covid-19 crisis has deeply impacted the co-living sector in India, altering rents and rental agreements, community spaces, profit margins and expansion plans.
While the last three months have seen a drastic drop in demand and physical occupancy in co-living facilities across cities, as students and young working professionals returned home during the lockdown, it is uncertain when business is expected to return to normal.
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. While most of its property owners have agreed to temporarily end fixed rental payments, some owners are waiving off minimum rental guarantee for 3 or 6 months depending on mutual agreement.
Typically, operators have a fixed rental or revenue-sharing agreement with landlords. As tenants continue to leave the facilities to return home, they are either not paying rent or terminating contracts, as a result of which operators are renegotiating with land owners and asking for discounts, waivers or move to revenue-sharing rather than pay fixed rents.
Expansion plans of most co-living startups are on hold as they focus on streamlining their portfolio With nearly 50-60% of the tenant base in co-living facilities being migrants, there is huge uncertainty in their return. Several multi-national corporations (MNC) have extended work-from-home for their employees until later in the year, and tenants are in no hurry to come back.
The pandemic has also questioned the ‘community’ factor in most co-living facilities. With physical distancing being the new norm, most operators said that residents will slowly move to single-sharing rooms, and contactless dining among other things will need to be introduced.
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