SOAR FOR MORE

2019

Case Study
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In a market that is getting increasingly crowded, Chillife, a co-living start-up has held its own by
restricting itself to only one city viz. Pune.

It is 9 pm on Friday and the founders Ajay, Rohit and Pooja are discussing a new business
opportunity that they can pursue. One of Ajay’s friends just informed them that Lodha Group, the
leading real estate player in India is looking for a co-living partner for Palava city for 500 of its
ready to move in apartments.

Ajay opened the page on Palava city to read more about it.

Spread over 4,500 acres, Palava is home to over 30,000 families. With a range of international
standard facilities including world-class educational institutions, high-quality sports facilities, a 5
lac sq. ft. Xperia mall, a high-quality pedestrian friendly environment, grand clubhouses, community
spaces and more, the city offers a lifetime of exceptional living.
Strategically located at the junction of Thane, Navi Mumbai and Kalyan, and home to over 30,000
happy families, Palava is poised for growth and is getting ready to be among the top 50 most liveable
cities in the world. Read more details in Exhibit 1 & Exhibit 2
After reading about Palava all three of them felt a sense of pride that someone in India is making
such a city. They feel strongly that this is the place to enter if they have to venture in Mumbai. The
decision seems a no-brainer. Firstly, its proximity to current and upcoming education and job
hubs. Secondly, considering the scale of the project and size of the developer; economies of scale
can be applied. Thirdly, the maintenance of the area and surroundings is already taken care by
Lodha.
It’s just that they have to figure out the economics of it now. Rohit pulled up the pricing details of
the area.
Details of pricing and rentals at Palava-
1. Current sale price in Palava
o 10,000 psf on carpet area
2. Carpet Areas of units
o 1 BHK: 506 sq ft
o 2 BHK: 653 sq ft , 692 sq ft, 734 sq ft
o 3 BHK: 881 sq ft
3. Rental rates
o 1 BHK: INR 9 K to INR 11 K ( INR 40 K deposit)
o 2 BHK: INR 12 K to INR 14 K (INR 50 K deposit)
o 3 BHK: INR 15 K to INR 16 K (INR 60 K deposit)
4. Maintenance
o Building: INR 5 psf/month
o City and clubhouse: INR 4 psf/month
Pooja reminded that as they are entering a new city; they have to setup the complete operations
from scratch. This means that they have to take all the important decisions from selecting the
operating model- fixed lease, revenue share or outright purchase. They would also have to think
about additional services that they can provide to their customers so that they can differentiate
in the market. Rohit suggested that they should create a business plan and present to their
investors covering expansion plan, profitability roadmap and key challenges that they have to
watch out for.
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*Ting Ting*
Pooja received a notification- a PropTiger report on consumer preference in co-living space.
As per the survey, the quality of services, poor maintenance and lack of trust are the key issues that
service providers in this segment must address before they are able to exploit the true potential of
co-living as an investment option. The survey also highlighted that there are several gaps between
demand expectations and supply even though service providers are currently adopting different
strategies to offer various products meant for specific consumer categories. Read more in Exhibit 3
This resonates with challenges that they are facing currently. They decided to call it a day and to
finish the job at hand over the weekend.
You are the Chillife founders and you need to create the business plan to be presented to
investors. You currently have 5 cr cash that is enough for running the current operations
for a year. Do remember to include at least the following in your business plan

 Operating model- Revenue share, Fixed lease or Outright purchase

 Additional services to be provided
 Projections, cost analysis and price to be charged to the customers to maintain unit
economics
 Occupancy levels target and promotion plans to achieve it
 Expected challenges and contingency plans
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Exhibit 1: Location PALAVA

ROAD
 Approximately an hour’s drive from South Mumbai (via the Eastern Freeway)
 Over 30 dedicated buses for connectivity within and outside Palava
 Road widening and flyover along Mumbai-Shilphata to reduce travel time to Thane
 Easy access to 4-lane MIDC road to Taloja and Navi Mumbai Airport
RAILWAY
 Nearest stations include Dombivli (Central Line), Vashi (Harbour Line), and Diva (Vasai-
Panvel Line)
 Planned metro from Taloja to Kalyan with stop in/near Palava
AIRPORT
 Close to the proposed Navi Mumbai International Airport
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Exhibit 2: Key Infra Developments In Palava

1. Education (Schools + Palava Institute)

Palava city has emerged as one of the key destinations of quality school education. It
already has 4 world class schools catering to both ICSE and CBSE curriculum.

Lodha Group has also launched the Palava Institute for professional and continuing
education to teach skills of future.
The programs will range from technical courses in sectors like IT, banking, and media to
courses on leadership, personal growth and self-exploration. Inaugural courses include
Data Analytics, Blockchain Technologies, Financial Markets, Certificate in
Entrepreneurship, Rules of Engagement – The Ethics Bootcamp, and Strategic Thinking
and Creativity.

2. Xperia mall + launch of new mall

Since its launch in August 2016, Lodha Xperia Mall at Palava has become the new
destination for shopaholics in and around Thane and Mumbai. With a plethora of options
in premium and international brands across a bouquet of more than 135 stores and 8
large sized anchors spread across 4 floors along with a 6 screen-PVR cinema, Timezone
and a foodcourt in the FEC rank, Lodha Xperia has everything for shoppers of all age
groups.

Palava, a greenfield smart city by Lodha Group, has also launched India’s largest (by land
area) destination mall.
Building on the success of Lodha Xperia, which is already 95% operational and continues
to see significant growth, the new mall aims to complement Xperia as a ‘destination
experience’ for families, not just around Palava, but Mumbai as a whole. It will include
new formats of shopping, entertainment and food across domestic and international
retailers, with new elements like a children’s museum, outdoor adventure facilities, water
sports at the lake, food streets, etc. Spread across an area of over 20 acres, the
development will include a conventional mall and an amusement park.

3. Commercial offices and business district

The first commercial tower of Lodha Group’s Palava, now houses HDFC Bank (India’s
leading private sector bank). The building will also host the office of Zone Startups India,
a partner in Palava’s Accelerator programme (more details in next point). With increased
job creation in the area, this partnership is the ideal start for Palava’s emergence of as a
new economic hub for companies.

The Lodha Group has planned 7 MM square feet of office spaces in the upcoming business
district, 0.20 million square feet of high-street retail in addition to the existing Xperia Mall
and 120-acre Grade A warehousing/non-polluting manufacturing park.

4. Palava accelerator
Lodha Group, in association with Zone Startups India (ZSI) has launched the Palava
Accelerator.This program will provide a test-bed to emerging technology startups to
conduct their pilots at Palava, a privately-developed greenfield smart city located in
Mumbai Metropolitan Region (MMR).
Through the program, Palava would provide entrepreneurs an opportunity to work in the
city and with the city management body, provide mentorship with reputed mentors in
these fields, provide access to investors and a stimulating environment to work in Since
the launch in September last year, the accelerator program has mentored 8 startups at
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various stages. The startups are from varied technology domains such as CleanTech,
Governance, Ed-tech, Fintech to name a few etc.

5. Industrial Park establishment

Lodha Group has entered into a joint venture with ESR India, the India platform of leading
Asia Pacific logistics real estate platform, to develop an industrial park at Palava City, near
Mumbai.
The industrial park, to be known as ESR-Lodha Industrial Park will comprise of 17
buildings developed on an 89-acre site. It is expected to be the first and largest master-
planned industrial park in Mumbai, India.

Exhibit 3: Co-living service providers must improve quality and

rationalize rates to gain traction: PropTiger study*
The co-living segment in India has the potential to grow into a $93-billion market however,
changes must be made in the existing modus operandi to make this housing segment a success,
reveals a consumer survey conducted by PropTiger.com, part of Elara Technologies Pte Ltd which
also owns Housing.com, Makaan.com, and FastFox.com.

As per the survey, the quality of services, poor maintenance and lack of trust are the key issues
that service providers in this segment must address before they are able to exploit the true
potential of co-living as an investment option. The survey also highlighted that there are several
gaps between demand expectations and supply even though service providers are currently
adopting different strategies to offer various products meant for specific consumer categories.

What inspires them to adopt co-living?

Moved by financial prudence, people also pick co-living over other traditional mediums because
of their desire to meet new people and to address security-related concerns, shows the consumer
survey. Demand for co-living spaces is also increasing because of brand trust and ease of search,
something PGs are not able to provide to the consumers.

How do they search?

The consumer survey conducted in May 2019, also reveals that those looking for co-living spaces
start their search online, including Facebook groups. They are also influenced by various offline
mediums to get to their final destinations. These include word-of-mouth recommendations and
out-of-home signage.

What is the budget range?

There is a huge variance in the average budget people keep for co-living spaces. Respondent who
took part in the consumer survey were willing to pay between Rs 4,500 to Rs 33,000 monthly,
depending on number of beds in a room, the service quality, brand, and amenities they wanted.

The survey indicated that while price is a key consideration, consumers are willing to pay for
better amenities in a co-living setup. The respondent said they were willing to shell out additional
money for facilities such as air conditioning, washing machine & dryer, daily cleaning services
and water purifier among others.
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What is the tenure like and why do they leave?

Here, too, there is huge variance. While some of the respondents stayed for as long as five years
in co-living spaces, others moved out within three months. Issues with roommates, unsatisfactory
food offerings and unresponsive management are the push factors that force people to move out.
People also move out because of pull factors such as the desire for independent living and safety
of belongings. Consumers also switch to rental accommodations with friends since they are more
comfortable living with people they know. They also move out when they start earning better and
are thus able to shift to an independent and private place.

What needs to improve?

Lack of transparency in the renting process and service providers’ unresponsive approach
towards maintenance facilities are some of the factors that act against this concept, leading to
consumers moving to traditional housing options. The co-living segment would also perform
better, shows the survey, if consumers were not obliged to pay security deposits, etc., that
ultimately jack up the overall cost. Respondents who took part in the survey were of the view that
opting for co-living spaces makes sense only if it amounts to lower monthly outgo as compared
to independent rental options. Surprisingly, the benefits of community living are not an important
factor yet in the decision making criteria although people are intrigued by the prospect.
Additionally, consumers are very concerned about the person they room with and hence effective
roommate matching tools become important.

*Basis the press release shared on ‘Co-living service providers must improve quality and rationalize
rates to gain traction: PropTiger study’