Demand for PG Accommodations on the Rise in Indian Urban Centres
Moneylife Digital Team 15 September 2023
Driven by a variety of factors, such as better work opportunities and facilities for higher education, the demand for relatively cheap informal rental accommodation in the form of paying-guest (PG) arrangements and co-living spaces is on the rise in India’s urban centres.
According to a recent report by Magicbricks, in the fiscal year 2022-23, the national capital region (NCR) represented 24% of the total demand for PG accommodation and 25% of the total supply, closely followed by Bengaluru which contributes to 23% of the demand and 17% of the supply. In the Mumbai metropolitan region (MMR), the demand and supply for PG accommodation accounted for 16% each, according to the report.
In 2021, Moneylife Foundation had published a comprehensive report analysing rental housing regulations and policies, while also evaluating the status of the rental housing market in India. It was observed that traditional formal rental housing in India, being plagued with problems and difficulties for both landlords and tenants, had allowed informal arrangements such as PG facilities and co-living spaces to flourish. 
The report had also discovered that the growing population of millennials in India, who are tech-savvy and willing to move to new cities for better work opportunities or for higher education, are the primary demand factors for organised rental housing facilities in urban centres. As the millennial population is not at a stage of their life where taking a home loan makes financial sense, they consider rental living arrangements to be more suitable for their current needs.
Moneylife Foundation’s report had observed that organised formal rental housing setups in India are plagued with numerous issues and concerns for both tenants and landlords. Disputes over refund of deposit amount, share of maintenance cost, upkeep of property, eviction notices for frivolous reasons, discrimination of tenants based on religion, marital status, caste, etc, are some of the common problems faced by consumers of the rental housing market in India. Therefore, informal setups such as dorms, PG facilities or co-living spaces, are a much needed boon for tenants seeking temporary accommodation. 
This has now been confirmed by the recent Magicbricks report which observes that 68.5% of tenants across India have an interest in double and triple sharing PGs. In fact, approximately 71% of PG listings on the Magicbricks platform feature double occupancy or larger setups. 
PG accommodations in the form of co-living spaces are also lucrative for real estate investors as the rental yields in such arrangements are far higher than those in the conventional housing market. While yields from traditional rental arrangements have remained stagnant at 2%-3%, paying guest accommodations offer 50% to 75% more yields, as reported by Magicbricks. Such temporary living arrangements are also an attraction due to the comparatively lower risks involved. 
Moneylife Foundation’s report had also studied the rising trend of co-living spaces and the impact such informal rental living arrangements has had on the housing market in India. It was observed that the rising demand for affordable and risk-free rental accommodation had allowed innovative start-ups to step in and offer co-living spaces designed with features and services essential for modern working professionals or students. 
Since the co-living market, which is essentially a formalised PG arrangement, is not governed by any regulatory policy at present, it has given operators a certain level of freedom to evolve, based on the demands of the market. Co-living has been popularised by the rise of housing start-ups offering affordable housing in homes or apartments, where common facilities are shared between room-mates. Although the concept of community living or living in a community has been around for generations, housing start-ups have managed to adapt the concept with innovative technology, catering directly to the specific needs of the younger generation.
Such co-living spaces can take many forms, encompassing everything—from single-family homes renovated to accommodate tenants, or apartments in a high-rise building that have been converted into dormitory-style lodging. Residing in such homes allows one to have flexible lease terms, either short-term or long-term, with additional facilities like cleaning services, professionally furnished common areas, amenities and utilities—all being part of the package.
In the traditional format of renting, a tenant would be required to bear the costs of utility bills, groceries and meals, domestic help, furniture and appliances (in the case of unfurnished apartments), which adds to the overall cost of living. In comparison, a co-living set-up covers the costs of these additional elements, which, in the end, means that the tenant saves a lot more on extraneous expenses.
As the advantages of co-living spaces far outweigh those of formal rental accommodations and there are minimal risks involved, millennials prefer to opt for such living arrangements. Consequently, the demand for such spaces has continued to grow over the years. 
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