Warburg Pincus to set up co-living platform with Lemon Tree Hotels

Lemon Tree Hotels, India’s largest hotel chain in the mid-priced sector, has formed a co-living platform with an affiliate of Warburg Pincus.

The joint venture will focus on the development of institutional-grade rental housing accommodation serving both students and young working professionals across major educational clusters and key office markets in India.

“Driven by the lack of quality accommodation and high rental/capital costs across key Indian cities relative to salary levels, the rise of co-living spaces is a part of the evolution of the sharing economy that will continue to gain significant traction,” said Keswani. “Our purpose-built developments will offer efficient and community-oriented living solutions in a hassle-free environment for our residents through a combination of unique product design and diversified service offerings.”

An affiliate of Warburg Pincus and Lemon Tree Hotels will hold 68 percent and 30 percent stake, respectively, in the joint venture, with the balance 2 percent to be held by Patanjali Keswani, founder, chairman and managing director of Lemon Tree Hotels.

“India has a large, addressable rental population across students and young professionals which is expected to grow significantly as a result of rapid urbanization, increasingly unaffordable housing prices/rentals and shortage of on-campus housing infrastructure,” said Anish Saraf, managing director, Warburg Pincus. “Moreover, this millennial population desires modern housing facilities with a sense of community living, which is missing in existing accommodation offerings. We are excited to partner for a second time with Patu and his team and believe that this joint venture is well-positioned to become a leading for-rent accommodation provider in India, given its access to significant capital as well as support from Lemon Tree Hotel’s proven design/development capability and existing on-ground infrastructure across the country.”

The partners will initially invest Rs. 1,500 Crore ($213 million) in equity over a period of time followed by an additional infusion of Rs, 1,500 Crore in equity at the option of the partners, to develop rental housing projects through a combination of greenfield purpose-built properties, refurbishment of existing under-managed/stressed commercial and residential assets taken on lease/acquisition basis as well as management of existing for-rent accommodation projects. The platform aims to provide affordable and conveniently located co-living spaces for students and young professionals, who are increasingly looking to be part of a vibrant community with like-minded individuals. The joint venture’s projects will also include shared spaces like living room, gym and well-equipped cafeterias in order to provide its residents with a high-quality and full-service co-living accommodation.