Lemon Tree, Warburg Pincus Form Joint Venture To Develop Co-Living Platform

The joint venture, in which rental housing projects will be developed, will entail investments of Rs 3,000 crore.

Lemon Tree Hotel at Whitefield in Bengaluru. (Source: Company Website)
Lemon Tree Hotel at Whitefield in Bengaluru. (Source: Company Website)

Hospitality firm Lemon Tree Hotels on Thursday said it has formed a joint venture with an arm of global private equity firm Warburg Pincus to develop rental housing projects envisaging investments of Rs 3,000 crore over a period of time.

The joint venture, in which an affiliate of Warburg Pincus arm and Lemon Tree Hotels will hold 68 percent and 30 percent stake respectively, with the balance 2 percent to be held by Lemon Tree Founder Chairman and Managing Director Patanjali Keswani, plans to develop a platform that would provide affordable and conveniently located co-living spaces for students and young professionals, the company said in a statement.

The joint venture partners will initially invest Rs 1,500 crore 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, it said.

The investment will be made 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," Lemon Tree Hotels said.

The joint venture marks the company's entry into an adjacent but new business segment focusing 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, according to the statement. "Our aim is to operate 1 lakh beds in next 7 years," Keswani told PTI.

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, he said.

"We look forward to working closely with Warburg Pincus and leveraging their successful experience in helping create market leading platforms in the shared accommodation space in other parts of Asia," Keswani said.

Warburg Pincus Managing Director Anish Saraf said: "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."

Shares of Lemon Tree Hotels closed on Rs 68.65, up 0.44 percent from the previous close.