With the rise of MNCs and job opportunities across the country, it is no surprise that co-living spaces are all the rage among millennials. The trend has been fuelled by the escalating demand for affordable accommodation in close proximity to commercial zones and business hubs. After establishing a firm foothold over the realty market of Chennai, DRA Homes has recently extended its expertise, by pioneering into the co-living spaces category.

We learn more about DRA’s plans, in conversation with Ranjeeth Rathod, Managing Director.

You are the first developer in Chennai to enter the co-living spaces industry. How did you spot this opportunity?

DRA Homes was one among the earliest players to spot the opportunity in co-living. It was 3 years back when we were doing our project at Mahindra World City that we realised that there were many single working professionals coming in from different cities, not necessarily bachelors, who have left their hometown and come to Chennai in search of opportunities. We found that their pay scale was such that they couldn’t afford an entire apartment for themselves. They were sharing apartments with friends in a disorganised way and were always at the mercy of their landlord, paying 11 months deposit, entering into long term commitments, making their own food and dealing with several pain points. We sought to make their life easy. We came up with a perfect system where we only charged per bed basis, allowed them to stay with their friends if they wanted to, provided them food, took only one month deposit and allowed them to exit in 1 month if they wished despite the agreement being for 11 months. This solved their problems and also signalled the start of the co-living journey for DRA. We have branded this venture under a separate vertical ‘Truliv’.

How viable is the market in terms of demand and future growth?

Co-living has a great future as the working population which is migrating from different cities is so high. People move from tier II and tier III cities to tier I cities and even move within the tier I cities, depending on job opportunities. In such scenarios, as not everyone moves with their family, they are on the lookout for a place that has likeminded people and offers facilities like food, Laundromats and shuttle service to their work place, while being well within their budget. Further, the lifestyle changes of millennials have ensured they are not attached to asset ownership and prefer to live on rent. This gives the opportunity to investors who buy the asset and rent it out to them, because here the rental yields are almost double the regular residential yields.

What is the main problem that co-living spaces solve for tenants?

Co-living apartments are typically the regular 2 bedroom apartments, with a living and a kitchenette and a balcony. However the sizes are optimised in the sense that the living and kitchen area are smaller, the bedrooms are decent sized to accommodate a wardrobe and the toilets have been demarcated with wet area and dry area so 2 people can use them at the same time. Further, in the building we try to offer amenities like a multipurpose hall, a gymnasium, a Laundromat, a convenience store and a central dining area to help residents in their daily needs.

What makes co-living apartments a good investment opportunity for retail investors?

Co-living is the buzz word right now as the investor gets double the rental yield as against conventional apartments leased to individual families, as they are let out on a per bed basis. Further, the demand is so high that the occupancy is generally upward of 90%. The rental returns are 5-6%, taking care of 70% of the EMI, reducing the investors’ cash outflow burden. With rentals going up in the near future, the rental returns will almost match the EMI amount, ensuring investors own apartments without burning a hole in their pocket. This trend has translated into a one trillion business opportunity in the real estate market right now.

How does DRA plan to consolidate the market in the next 5 years?

DRA is betting big on co-living and that is why we created a separate vertical ‘Truliv’. Truliv is not an operator but provides good quality supply for the operators who white label with us and market the beds and also operationally manage it. We are identifying good quality supply in different forms. We do greenfield projects where we buy the land and build with specifications to suit the requirements of those using co-living spaces. We also do brownfield projects where we undertake a long term 5-year lease with developers or land owners who have already constructed unsold apartments. We refurbish it to suit co-living spaces and market it on per bed basis. Right now we are among the largest suppliers of quality co-living spaces in Chennai and we have over 2000 beds, with plans to touch 5000 beds in the next 2 years. In 5 years we seek to extend our presence pan-India and have an upwards of at least 50,000 beds.