What is driving rental and coliving demand in India?

The size of rental market in India is estimated to be USD 13.9 Bn by 2025. Around 50% of this is attributed to the Gen-Z population, and 30% to the millennial population. Demographic profile of India’s work force, changing behaviour of gen-Z and millennials, rapid urbanisation, digital behaviour and capital allocators preference are the five key factors are driving this increased trend in rental real estate.??

Demographic profile of the work force??

Around 52% of the Indian population comprises of Gen-Z and Millennials. In 2023, millennials constituted 70% of the Indian work force have emerged as the backbone of many Indian companies. Indian technology sector workforce comprises of 86% to 90% of Gen-Z and Millennial work force. The innate behavioural traits, real estate requirement patterns, lifestyles and purchasing power are often intrinsic to their nature of real estate consumption patterns.????

Changing behaviour of gen-Z and millennials.??

Internet penetration has shaped the consumer across industries including real estate. 50% of Gen Zs and millennials say they live paycheck to paycheck with high cost of living is their top societal concern. Big life decisions like buying a house and starting a family are often postponed to later stage. Ability to maintain a positive work/life balance and not live their life on their own terms, and not necessarily to live up to societal expectations. This has shifted the consumption pattern of with increasing demand for rental real estate. The behavioural pattern of consumers of community and experiential living with a value that meets their pocket has given rise to the Co-Living segment.??

Rapid urbanisation??

Industrial growth, rise of services sector has shaped rapid urbanisation. In India, contribution component of urban growth is segmented into three categories according to a study by International Institute for Population Sciences. In India, it is estimated that more than 500 million individuals, i.e. approximately 35% of the population stays in urban areas. As the decade progresses, India will witness addition of 100 million urban dwellers, which will further rise to 60% by 2050. (Ref: Macrotrends, Urban Development Ministry, Govt. of India) It is estimated that 28% of the urban households stay in rental housing. This number shall be higher in mega cities. The demand for rental living, is 5.7 million units across top 30 cities (Tier I, II, II) in the country -comprising of working singles living on rent (migrants and domicile) and unmarried student population. This together adds up to 5.7 million across top 30 cities (Tier I, II and III) in the country.??

Digital behaviour of consumers:??

There is a remarkable increase in internet penetration, adoption and consumption across enterprises and consumers in India. 700 Mn internet users across the country, 470 Mn social media users and 350 Mn digital payment users. 80% of digital consumers in India prefer searching and discovering new products online before visiting physical stores or seeking offline. 69% of digital consumers prefer digital communications for customer support and interactions. Convenience, value and trust are key drivers across most internet platforms with??

Capital allocators preference for real estate supply??

The sector interest has increased after a funding winter for two straight years. Investments in the sector dropped from USD 148 million in 2021 to USD 21.7 million in 2022 and USD 6 million in 2023. With strong fundamental demand backed by urbanisation, consumer behaviour and digitisation, institutional investors and global funds favour co-living and data centres as an alternative asset class. The understanding of private equity funds is also well defined in international markets where co-living is a mature sector. Recently, Singapore’s CapitaLand Investment announced CLARA II: A $600 Million private equity fund for serviced apartments and co-living properties. Brookfield Asset Management, which has a real estate AUM of USD 690 billion globally is also looking to invest more in the coliving, rental housing and serviced apartment asset class.