Realty players in the city, who have been under the onslaught of several disruptive changes in the sector over the past year, are finding newer ways to keep the cash flow intact, and are diversifying into new areas of realty such as service apartments and hospitality-based offerings.

Chennai:

The players in the city to have latched on to this new revenue stream are Akshaya, Olympia and Plaza groups. Olympia’s Sequel, Plaza’s Tranquil Acres and Akshaya’s ‘The Belvedere’ are some projects that came about as part of the new diversification strategy. 

Excess inventory of residential homes is one of the factors behind the emergence of this trend. 

While pure vanilla rentals generate a low 2 to 2.5 pc Return on Investment (RoI), developers are evaluating a different approach to enable higher returns and clear off existing stock. 

Ajit Chordia, MD, Olympia Group, tells us, converting the existing set of fully completed projects into rental stock (like service apartments) and selling them off later as and when the market improves, is prudent. 

“If there is potential to offer co-living spaces to working women and men, such a model could result in rental yields going up 2X times,” he says. From a buyers’ perspective, the opportunity to earn rentals is a motivational factor for such a diversifying approach. 

“This is a global trend both in the commercial and residential real estate segments,” says Sanjay Chugh, Founder, Skyline Property Consultants. He believes the RoI on converting properties or guest houses into service apartments would be about 4 per cent. 

“These models provide incremental revenue streams, whereas standalone service apartments typically fetch RoI of 2.5 per cent. 

Rental accommodation for students located near universities is also catching up with twin sharing or 3-bed sharing at nominal rates being the preference,” he adds. 

As per Ashwin T, Director, Plaza Group, which has realty projects coming up at Perungudi, Thoraipakkam and Ottiyambakkam, “Student housing is a segment that we are exploring. 

The overseas model, popular in Thailand and Singapore involves homogenous living spaces near academic institutions, which get a yield of 2 to 3 per cent. If that model can be replicated here, then the yields can go beyond 6 per cent.” 

Plaza has set a two-year timeline for firming up this move. Three years ago, the real estate group started dabbling with hospitality, when it decided on a service apartment block in its residential project. 

However, Ashwin says “Our entry was a tad early as the anticipation of long-term accommodation demand on the back of commercial development on the Pallavaram-Thoraipakkam Radial Road misfired.” 

Instead, selling off the land parcel would have been more prudent, he rues. Considering the challenge of managing multiple occupants, collection of rental/maintenance and high churn rates, developers find it viable to outsource their service apartments or co-living spaces to companies specialising in co-living tech management. 

Many startups have sprung up in this space, who take care of the management and marketing aspects too. 

Nest Away, Zolo, CoLive, Square Plums are some of operators in the co-living spaces business. 

“Our experience has been good. In six months, we will achieve 85% occupancy in projects where we have introduced co-living options,” Chordia sums up. As per industry sources, DRA Group (in Maraimalai Nagar) and Navin’s are also considering forays into this space.