HDFC Capital Advisors launches ‘The HDFC Affordable Real Estate & Technology Program (HeART)’
HDFC Capital Advisors, a wholly owned subsidiary of HDFC, has announced the launch of its new initiative viz., ‘HDFC Affordable Real Estate and Technology Program (HeART)’. The HeART program seeks to mentor, partner and invest in real estate technology companies that drive innovation and efficiencies within the affordable housing ecosystem, according to a release from Mahesh Shah, General Manager& Head Public Relations, HDFC. 
 
HDFC Capital believes that technology will play a significant role in the development of ecosystem for affordable housing. All processes in the development of a house namely – Land/Approvals, Planning & Design, Construction, Project management, Sales and Facilities Management are likely to undergo significant change due to technology disruptions in the near term.
 
HeART features include the following:
 
As part of the HeART initiative, HDFC Capital will provide a platform to real estate technology companies with innovative products aimed at creating efficiencies and lowering costs in each part of the development cycle of a real estate project.
 
A key challenge faced by technology companies in real estate (popularly called Proptech) is lack of scale and access to the right partner developers. 
 
This shall be an ongoing initiative that aims to foster collaborations between technology companies and the real estate sector and thereby create value for the entire affordable housing chain. HDFC Capital shall also be partnering with leading academic institutions, industry platforms and accelerators to create an ecosystem that supports various components in the development affordable housing and thereby make the process more efficient. 
 
HDFC Capital Advisors Limited, the largest real estate private equity fund in India focused on affordable and mid income residential  housing has invested over USD 1 billion on the last 24 months with marquee developers across India in the affordable and mid income housing space.

Deepak Parekh, chairman, HDFC said, “HDFC’s endeavour is to act as an enabler to the growth of affordable housing in the country. HeART will support businesses which are innovating and building technology solutions to enhance the supply of affordable housing. India has a huge shortage of housing and these incremental steps will help lower the cost of housing for homebuyers.”

Ms.Renu Sud Karnad, managing director, HDFC said, “The HeART initiative along with HDFC Capital will play a significant role towards the ‘Housing for All by 2022’ objective of the government. HeART will invest in real estate technology companies and connect them with real estate developers, thereby creating value across the entire affordable housing chain.”

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Co-living – The New Star of Indian Rental Housing
Co-living, like car-pooling and co-working, is the result of demand for more evolved rental housing solutions coming from millennials, students and young working professionals whose choices differ vastly from those of previous generations. Currently, this new accommodation option is most popular with young and unmarried millennials aged anywhere between 20-30 years. Professionals who don’t live with their families in the city of work are also considering this option.  
 
Co-living provides such individuals with a way to circumvent the isolation and loneliness that is often integral to a hectic, driven urban experience. While the primary demand for co-living spaces currently comes from such tenants, the concept itself is a lot more 'accommodating'. In fact, the future may very possibly see demand for co-living solutions coming single seniors, as well. 
 
Cities such as Pune, Bengaluru, Gurgaon, and Mumbai first saw this new concept emerge in force, and it is now also taking root in smaller cities such as Lucknow and Jaipur - basically, in cities with a large student and millennial workforce population.   
 
So, how is co-living Different? 
 
Basically, co-living is an avant-garde rental housing concept wherein fully furnished homes are rented to groups of people who wish to cohabit without the restrictions typical to the more traditional paying guest/hostel-type accommodations for urban singles. Co-living spaces allow their residents to mingle and interact while simultaneously providing privacy at various levels - especially from intrusive landlords.  
 
These are fully managed spaces - much like serviced apartments - but with several extras and customization possibilities included. For instance, tenants can choose private or shared bedrooms. Common kitchens and areas for dining, general interaction and recreation are also integral to co-living units. 
 
As such, co-living spaces are about a lot more than mere lodging and boarding. They offer convenience and an engaging lifestyle for tenants who find the restrictive paying guest (PG) or hostel environment onerous and overly limiting, yet have considerable difficulty with finding accommodation that provides a less encumbered experience.  
 
While paying guest ‘digs’ and hostels are purely about lodging and sometimes boarding, co-living provides an entirely new lifestyle. This far more sophisticated way of living offers a streamlined, hassle-free and invigorating living experience with opportunities to cohabit and interact with others without overbearing scrutiny and 'house rules'.  
 
While informal iterations of co-living are not new, start-ups such as Oyo Living, Nestaway, CoHo Living, etc. are now bringing in their considerable expertise to offer a professional and more organised way to cater to the demand for less inhibiting encumbered rental living. Apart from the more entrenched hospitality players, a slew of start-ups is also foraying into this new way of rental living - heavily backed by investors such as Goldman Sachs, and Sequoia Capital.  
 
  • As per ANAROCK data, Sequoia Capital invested USD 10 mn in Delhi-based student accommodation platform Stanza Living in 2018. Goldman Sachs and HDFC were also key contributors to student housing last year, solidifying interest of global investors in this new and upcoming segment. 
  • Warburg Pincus, a global Private Equity fund and mid-market chain Lemon Tree Hotels set up a JV in late 2018 to create the first co-living platform focusing on the development of affordable and conveniently located spaces for students and young working professionals across major educational clusters and key office markets in India. 
 
Co-living - A New Investment Asset Class? 
 
While the concept is rapidly being institutionalized by organized players, this does not mean that there is no scope for individual players. By converting a normal apartment of sufficient size into a co-living space, a property owner can capitalize on this vibrant and growing trend in rental housing.  
 
However, there are provisos for the reasonable success of such a venture, largely related to location and rental cost. 
 
Urban singles invariably prefer to live close to their workplace/education centre. For instance, the key areas in Bangalore seeing a spurt of co-living spaces include Bellandur, HSR Layout, Electronic City, Nagawara, Domlur and Mahadevapura. Most of these areas are home to IT professionals who work in and around the areas or those that work in the existing start-up offices within or near the locality. 
 
As per ANAROCK data, IT-driven markets like Electronic City, Mahadeva Pura and Nagawara offer comparatively lower rentals than start-up driven localities like HSR Layout, Koramangala and Indira Nagar. The rentals in these IT-driven markets are 15-20% less compared to those dominated by start-up professionals.
 
Potential ROI on Co-living Spaces
 
Going by the recent trends, co-living may offer a higher rental yield of as much as 8-11%, as compared to the current average yield of 1-3% in residential properties. It is definitely paving the way for a new asset class in real estate investing. Interestingly, co-living spaces can also bring down the average cost of living for consumers by as much as 10-15% on the back of optimal real estate utilization and the economies of scale. 
 
Co-living certainly offers an opportunity for fairly steady and higher-than-average rental revenue. Though there is bound to be some churn in tenants, the reliability and comfort of a particular unit or set of units spread rapidly by word-of-mouth. An individual property owner who has transformed and tenanted one or two apartments into co-living units can expect more customers coming in via reference.  
 
Not Without Challenges 
 
Making such a play is not as easy as it may initially seem. There are certain inherent challenges: 
 
  • As opposed to traditional rental accommodations such as paying guest digs or outright rental flats, co-living spaces call for much higher investment - both in terms of one-time setup costs as well as the regular maintenance and servicing of the space. 
  • Operating a co-living space calls for a certain degree of knowledge about the specific requirements of this new niche residential segment. 
  • It is also not always easy to get the required permissions from a particular housing society to set up a co-living facility.
  • The location needs to be just right, especially in terms of connectivity and proximity to major educational institutions and workplace hubs. 
  • The size of the unit and the amenities provided both within the housing society and within the unit itself have to be just right.
  • Getting tenants is not always easy. The relatively higher rentals of co-living spaces in comparison to the traditional PGs and hostels can be a put-off. Many inward-migrating young professionals find high rentals rates unaffordable and non-sustainable in the long run. 
  •  The trend of co-living is still in its fledgling phase in India and has only selective takers so far. Given that the residential segment is seeing reduced investor interest in the present market scenario, it will take a little while for this segment to gain the kind of momentum it has seen in more developed countries. 
 
That said, co-living is definitely here to stay and will find increasing takers - not only because of the aspirations of young professionals and students but also the evolving mindset of society in general.
 
Indian Rental Housing Scenario 
 
  • Today the overall share of rental housing could be anywhere between 35-45% of the total Indian residential real estate segment. It is definitely increasing, particularly in urban centres which account for nearly 70% of the total rental market. 
  • As per IMF’s last estimate two years ago, India’s residential rental market was worth more than US $20 billion, comprising of $13.5 billion in urban areas, $0.8 billion in rural areas, and $5.7 billion of vacant non-resident Indian property brokerage.
  • The Government Census maintains that nearly 28% of urban households lived in rented houses in 2011. However, this number is definitely much higher now. It must be borne in mind that the rental housing market is almost exclusively a private one, driven by myriad small-scale providers. This makes it more difficult to chart than residential sales. 
  • The last Census also estimated residential vacancy levels in urban areas to be at 12% in 2011. This will be much higher now. The need of the hour is a sound rental policy by the Government to ease the country's housing issues to some extent
 
(Anuj Puri is chairman of ANAROCK Property Consultants Pvt Ltd)
 
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COMMENTS

Ralph Rau

3 days ago

Any "Co-Living" REIT to be launched in India ?

Businesses Complain About Slow Arbitration Payout, Dispute Resolution
Upset over the enforcing of contractual obligations and delays in arbitration awards, Kolkata-headquartered infrastructure finance major Srei has decided to be extra cautious where the government or its agencies are a contracting party.
 
Having burnt its fingers over financing public-private partnership (PPP) projects, the private financial institution believes that banks are reluctant to fund projects because sanctity and validity of a contract is under severe challenge.
 
"The confidence in the infrastructure sector is at its lowest ebb today because there is significant delay in arbitration awards and long-drawn litigations," Srei Chairman and Managing Director Hemant Kanoria told IANS.
 
Srei is a leading infrastructure financing company with consolidated assets under management of Rs 49,913 crore as on December 31, 2018.
 
He said that the situation will not improve until there is a very clear cut demonstration by the government on enforcing contractual obligations and that there is no reneging on contracts on flimsy grounds.
 
"I think what is very important is that the sanctity of the contract needs to be kept. Second issue is that if there is an arbitration award given against the government, it must be honoured immediately," Kanoria said.
 
He stressed the need for establishing discipline in contracts, arbitration awards and certain processes for reviving private sector interest in infrastructure.
 
The issue clearly reflects in the company's books. In the quarter ending December, 2018, Srei Infrastructure Finance disbursed a total of Rs 3,800 crore, as compared to Rs 5,731 crore in the corresponding quarter of last year.
 
Even as pace of dispute resolution has improved and arbitration awards have been expedited, much remains desired to make the infrastructure sector investor-friendly. 
 
A Niti Aayog study earlier noted that India takes as much as 1,420 days and 39.6 per cent of the claim value for dispute resolution. The situation is only slightly better than Bangladesh, the report found.
 
"After the Vijay Kelkar committee report, reforms were initiated in the way arbitration awards have to be done. There has been definitely an increase in the pace of the arbitration awards. But there is enough scope to make things better for the contracting community," said Sandeep Upadhyay, MD and CEO, Centrum Infrastructure Advisory.
 
The three key infrastructure segments of highways, power and ports account for most of the arbitration proceedings between the private and the public sector. As a result, thousands of crores of rupees remain locked in litigations which, if freed-up, could be used to build new projects.
 
"Dispute resolution and contract enforcement should be quicker. It is in the interest of lenders, developers and all other stakeholders. Delay in payment of arbitration awards through endless litigation badly affects all the parties involved and eventually slows down infrastructure development." said L&T Infrastructure Development Projects CEO Shailesh Pathak.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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