Co-living, co-working can generate 7-11% rental yield

Co-living, co-working and student housing, which are emerging segments in the Indian real estate sector, have the potential to generate rental yield of 7-11 per cent, according to a report by CII and Anarock.

The report, titled 'Emerging Asset Classes: The Future Looks Promising', was released at the 2nd CII Real Estate Confluence here on Thursday. It delves into these highly promising new Indian real estate asset classes and explores their growth drivers as well as the underlying opportunities for investors and other real estate stakeholders.

"Co-living, student housing and co-working have rental yields of anywhere between 7 per cent and 11 per cent -- a significant step-up from the 3 per cent national average rental yield of traditional housing formats," Anarock Chairman Anuj Puri said.

Co-living, student housing and senior living are the next evolutionary step in the residential real estate domain, while co-working has evolved from traditional office real estate, he said.

"The drivers behind this evolution are changing social dynamics, a highly enabled start-up environment, rising interest in higher education by migratory student population, and the need for quality housing solutions for senior citizens," Puri said.

According to the report, top-6 co-living players currently have 1.18 lakh beds priced between Rs 6,000 and Rs 30,000 per month. As many as 13 prominent student housing brands now have 1.5 lakh beds across India.

Senior housing growth is primarily in top cities' outskirts and tier-II and III cities like Bhiwadi (NCR), Neral (Mumbai), Talegaon (Pune), Devanahalli (Bengaluru), Mysuru and Coimbatore.

"Co-living, student housing and senior living are fundamentally innovative and specialised residential assets, but with varied business models," Puri said.

While co-working as a segment has flourished in India, there are interesting differences in how local and global players address it. Domestic co-working operators have restricted their presence to tier-I cities, while global players are also penetrating into tier-II and III cities.

The report also highlighted that data centres, with potential of 10-14 per cent rental yield, is drawing high investor interest.

The recent Budget's proposal to roll out a new policy for building data centre parks underscores the importance and relevance of this promising asset class.