When Deepak Anand was running HDFC Bank’s private equity fund to invest in the affordable real estate segment, he realised that something was amiss.
“I studied the co-living market very thoroughly and realised that many players in this business were more interested in increasing their revenue than improving the product,” says Deepak, Co-founder and CEO of Housr.
Believing that he had much more to offer in the co-living space, Deepak decided to leave his corporate career of more than 15 years and turn to entrepreneurship.
Along with Kalpesh Mehta, he founded Housr, a co-living startup based out of Gurugram in 2018.
Housr approached the co-living market a little differently, believing a premium product would find takers.
“We figured out there was a market opportunity for a very standardised product in the premium offering,” says Deepak, adding, “We were not interested in just adding heads on beds.”
The team looked at developing secure accommodations with all the modern amenities and on the lines of a business-class hotel. These include services like enhanced security, full-time concierge, community building activities etc.
Housr co-living space
The company started in the base city of Gurugram with 500 beds and priced at 1.5x of the accommodation, and to Housr’s pleasant surprise, the beds were fully occupied within 30-45 days of the launch. These were all new accommodations that were provided by Housr.
“This gave us confidence that there was a market for a premium product offering,” says Deepak.
Between 2018 and 2020, Housr went on an expansion drive in the National Capital Region, Pune, and Hyderabad. However, the startup had to put its plans on hold in 2020 amid the challenges presented by the COVID-19 pandemic. Luckily, they had sufficient capital runway as they had raised around $7.1 million in funding in December 2019 as part of its Series A round.
While the real estate market was down during the outbreak, Housr saw an opportunity and picked up accommodations from real estate developers at a 60 percent discount. It also got into a revenue-sharing agreement with these developers.
According to Deepak, except for the three months when the outbreak peaked in the first two waves in 2020 and 2021, Housr did not witness any major disruption to its business.
“We expanded 6X in adding new accommodations during the whole COVID-19 period,” says Deepak.
Today, Housr has over 55 properties with 5,000 beds under its fold, and it recently added Bengaluru as a location following the acquisition of StayAbode for an undisclosed value which was announced in June this year.
Deepak calls the startup the “business class of co-living”. The co-living properties are priced in the range of Rs 26,000-45,000, according to Deepak, and the average price in Gurugram is Rs 32,000.
The startup targets millennials with upward social mobility who have a monthly income of Rs 1 lakh and above.
Under its business model, Housr enters lease rental agreements with the real estate developers where the latter make all the capital expenditure. It then pursues a standard lease of 11 months with customers.
Deepak claims their co-living properties have always had more than 90 percent occupancy and attributes this to the DNA of the startup as well as its premium product.
Three months ago, the co-living startup diversified its offerings with the launch of Housr Homes.
“Co-living was focused on single working professionals but we figured out there were small families who also need managed living,” says Deepak.
Housr Homes goes beyond serviced apartments with 1BHK, 2BHK, and 3BHK spaces and has all the modern amenities akin to a typical five-star hotel. A 2BHK accommodation offered by the startup in Gurugram is priced in the range of Rs 70,000-100,000 per month.
Recreational area of Housr co-living
According to Deepak, Housr Homes has had 100 percent occupancy from the day of the launch, and claims that its profitability is 2X as compared to its co-living business.
This startup claims that 50 percent of its revenues come from inbound requests and referrals. Only about 20 percent of its sales are done through outbound marketing activity.
Demand is back
Deepak believes that the demand for co-living accommodation is back to pre-COVID-19 levels, however, the challenge remains on the supply side. Housr, on average, launches about seven to eight properties every month.
“There is a 100 percent bounce back in the business and we have increased our prices by 25 percent in the last six months,” says Deepak.
According to a report by Cushman and Wakefield, the co-living market in India is expected to touch a size of $13.92 billion by 2025. There are numerous players in this segment with the likes of Stanza Living and Zolo.
As part of its future plans, Housr aims to onboard around 12,000-14,000 beds under its portfolio by FY23. It expects to generate 70 percent of its revenues from the co-living segment, and the rest from Housr Homes.
According to Deepak, Housr’s operations are profitable at the unit level with healthy double-digit margins.
He adds that though the startup’s focus will be largely on metro cities, it will also assess possible entry into locations such as Chandigarh, Lucknow, etc.
Housr is looking to raise its next round of funding which will be primarily used for its expansion activity.