The 'Kosts' of Indo Co-living: Sabrina & Sarah Soewatdy of Rukita

In our first podcast of 2021, Sabrina and Sarah Soewatdy, co-founders of leading Indonesia co-living platform Rukita, discuss how they have revolutionized Indonesia's traditional "kost" model. They also reflect on how COVID led to dramatic yet successful shifts in Rukita's customer focus, the blatant honesty between sister/co-founders, and the digital demands of Indonesia's millennial university student and young professional.

Transkrip Bahasa Indonesia di sini.

Transcript

(Transkrip Bahasa Indonesia di sini ...)

ALAN  0:12  
Welcome back to the very first episode of Season Two of Indo Tekno. Selamat datang kembali, dan Selamat Tahun Baru semuanya! So pleased to be back on air after a very restorative and relaxing year-end break. We have for you a new logo, a new musical soundtrack and a new website to ring in the new season. I'm also super pleased to have on as our first guests of 2021 siblings Sabrina and Sarah Soewatdy, cofounders of next generation Indonesian co-living platform Rukita. The company has shot out in front as a category leader, and I'm sure Sabrina and Sarah have a lot of fascinating learnings to share with us today. Thanks for joining us, Sabrina and Sarah.

SABRINA SOEWATDY  0:54  
Thank you so much, Alan. By the way, your Bahasa is wonderful.

SARAH SOEWATDY  0:58  
Happy New Year, Alan. Pleasure to be here.

ALAN  1:02  
Let's take it from the top. Sabrina, let's start off with a simple question: What is Rukita?

SABRINA SOEWATDY  1:08  
Alan, Rukita is a property tech company. We provide solutions for the urban housing market in Indonesia, by providing affordable and standardized service living for the mass market. We have over 100 locations in Jakarta and its surrounding area. And we are a hyperlocal business. At this time we manage an asset class that Indonesians called "kosts." And now typically these buildings consist of 10 to over 100 rooms for the long stay rental market. So here Rukita is a bridge between two customers. One is the landlord and the other one is the tenant. For the landlord, we are revenue and property managers; and for the tenant, we are a service provider. And we make sure that the properties are well maintained. We believe that the kost is our entry point to disrupt the affordable housing market in Indonesia. For market value alone, it is a $14 billion annual rental for millennials in Indonesia. The housing market in Jakarta is very expensive, and it continues to rise. So when you compare the ratio to income, you see that this is something that we need to disrupt. We see that there needs to be an affordable alternative that empowers the lifestyle for today's millennials.

ALAN  2:20  
Very useful. Now Sarah, I think our non-Indonesian listeners should first better understand what a kost is. Could you describe the kost in terms that they would easily understand?

SARAH SOEWATDY  2:31  
Sure. a kost is pretty much co-living or communal living. It may be a new trending concept in the West. However, in Indonesia, it is already a part of the culture. People naturally look for a kost when they are looking for a place to live, especially when budget is a factor, as apartments usually require upfront payments in Indonesia, and are generally more expensive than kosts. In a kost, people will share community areas such as the living room, rooftop, dining room, kitchen, and sometimes gym and pool. However, they all live in individual rooms, where most have bathrooms inside as well, so they can still have their privacy, and at the same time enjoy the facilities and the company of their friends. It also gives them opportunity to meet new friends, whereby in this digital native society, it's difficult to meet new people. According to Badan Pusat Statistik (the Central Bureau of Statistics), there are at least 4.7 million people that live in a Kost in DKI Jakarta ("Special Capital City Region") alone. So this 4.7 million doesn't include the surrounding areas like Bogor, Depok, Tangerang, and Bekasi.

ALAN  3:51  
Fascinating, and I would say as a westerner myself, this is quite a novel concept. And I think that Indonesia will deliver a lot of unique models as it moves into its adulthood on the internet side. This is clearly a model that I think a lot of other markets are likely to embrace. Now Sarah, what exactly is the "Rukitafication" that property owners tend to undergo when you onboard them? Is there extensive refurbishing involved, or is it a more technology oriented transformation?

SARAH SOEWATDY  4:23  
Depending on the condition of the building, it varies from very light touches to heavy refurbishments. We aim to provide a clean and comfortable place for our customers. So it is important for these properties to meet our standards. We usually upgrade the common areas as well, and make sure that when property owners join Rukita, we will also improve their property value through our uplift in occupancy and improved standardization of the physical building.

SABRINA SOEWATDY  4:55  
Part of the retrofit also happens if we talk about technology in regards to making the building very WiFi friendly. Internet in this day and age is a must. So sometimes, that would be the technology transformation that we do have to retrofit for every Rukita building. It is to make sure that there's steady internet and making it easy also for our tenants to top up internet speed through our tenant apps.

ALAN  5:21  
You can do whatever you want with the digital natives, but they need their Wi Fi, right?

SABRINA SOEWATDY  5:26  
Yeah, that's the basic need. 

ALAN  5:28  
Now Sabrina, speaking very bluntly, I would not expect many prop tech or O2O (offline-to-online) real estate business models to have thrived during the COVID pandemic. What was 2020 like for Rukita?

SABRINA SOEWATDY  5:41  
2020 was a very big year for us. We are in this growth trajectory mode. But through this pandemic, we did two very important things. Number one is that we made sure that we expanded our outreach to the professional demographics, while the universities closed due to COVID. And then secondly, we made sure that we optimized the unit economics of all our buildings to a healthy margin. We also sped up the rate of the occupancy much faster, and the standardized building with security and higher attention to hygiene became a safe haven for many of our tenants. So we see that when Rukita exists in the community, it became an essential part of long stay accommodation.

SARAH SOEWATDY  6:21  
Let me elaborate more. We feel that we are still able to thrive and even grow during this pandemic because people even more, need a safe place to live. Also, we take safety precaution seriously in our units, making sure strict COVID protocols are implemented. Putting the customer first is important. We need to make sure that they are comfortable and make sure that they feel they are at home. Hence, people still choose us as their preference of stay. On Sabrina's first point; when the universities closed and went to online learning, our customer profiles switched quite rapidly; from having 80% of the tenants as university students and 20% professionals, to now 80% professionals and 20% university students. However, even for the university student market, despite the fact that they are still closed, we still have quite a number of students that keep their place and continue to pay for the rent even though they don't stay inside.

ALAN  7:26  
So clearly, we're trying to act as a bit of a safe oasis in this era in which you've got a lot of urban areas ravaged by COVID. So you really played up the safety and sanitation of the Rukita brand. Is that correct?

SABRINA SOEWATDY  7:42  
That's correct. And interestingly, with the lock down, many areas are closed down. And so this makes Rukita spots become much more essential. Because some offices and some commercials don't have a choice but to still stay active. Not everybody is digitally able to run their business. So then having the safe long stay accommodations is becoming very important and essential.

ALAN  8:07  
Make sense. Now Sabrina, can you give us a sense of the scale that you have achieved through the end of last year, and what your growth goals are for 2021 and 2022?

SABRINA SOEWATDY  8:17  
Yeah, we have grown to 3,000 rooms, and we are stabilizing our occupancy at 70% for our mature properties. And "mature properties" here means that buildings are aged more than three months with us. And our tenants continue to increase month-on-month in this pandemic. So for 2021, we are being cautious about the market conditions and COVID as we understand that there'll be a slower recovery for Indonesia. But at the same time, we are hopeful that with our solution for landlords and for tenants, we can start to increase the pace of growth again. We have product launches planned. And we certainly want to double down on the business model that we see as working. So our company is definitely moving into healthy margins. So we certainly want to continue this moving forward to a more sustainable growth model.

ALAN  9:05  
Understood. So a few more questions about that growth. How do you go about achieving the growth? Where are we currently for instance, clustered in Indonesia? And do we fan out domestically going forward? Or do we expand out of Indonesia this year or next? And are we considering other brands for other demographics? What underpins our growth going forward?

SABRINA SOEWATDY  9:26  
We are definitely looking to expand to other parts of Indonesia. It's a huge market. And between the islands, dwelling topography also changes. So this makes it very interesting for Rukita. We want to make sure that our housing solutions stay relevant throughout the different cultures within parts of Indonesia. Because as you know, Alan, as we cross over to the different islands there are different habitats and different types of ways of living. And since we see that living solutions are a very localized thing, we want to make sure that our solutions, as we are expanding, stay very relevant to the local culture. But in the future, we are not closing our doors to country expansion. But it's very important that our solution stays hyperlocal to the environment that we are in.

ALAN  10:15  
Being in, far and away, the largest market in Southeast Asia, I can imagine that generating a lot of growth for years to come. Sabrina, another question, how exactly does the business model work? How do you derive revenues?

SABRINA SOEWATDY  10:28  
It's pretty straightforward actually Alan. Our revenue comes from tenants. And we are developing also other revenue streams as part of our ancillary services. And so when I say that it's straightforward and that it comes from the tenant, it is basically a rent-paying tenant approach.

ALAN  10:45  
Gotcha. Now Sarah, at this point in our conversation, I'd like you to cup your hands over your sister's ears. My next question is, what is it like working with Sabrina and vice-versa?

SARAH SOEWATDY  10:57  
You know, to be honest, it's great. We can blatantly be honest to each other. We don't need to filter anything out. And for the betterment of each other and the business, we can be harsh without offending each other.

SABRINA SOEWATDY  11:11  
Yeah, so basically, we play on each other's strengths. And the great things about working with my sister is that I'll always get "no-filter" opinions and feedback. So I feel so blessed to be able to share this startup journey with her. It's been really an incredible one. 

ALAN  11:28  
Great. So my next question ladies is, how do you guys divvy up the work?

SARAH SOEWATDY  11:33  
So, Sabrina, she's the boss. She's the CEO. She makes the final decision. As for myself, I'm filling the COO role of the company. So I take care of the operations, business development, customer excellence, community and owners relations. 

ALAN  11:53  
Gotcha. So it sounds like there's a nice division of labor there. Now, Sarah, you've referenced the importance of social connections within the Rukita experience. Can you share with us what exact role it plays?

SARAH SOEWATDY  12:05  
So in Rukita we, the tenants and even our teams are called "Rukis", and the community is called "Rukita Tribe". We hold community events in each property regularly. However, during this pandemic, we currently limit it to virtual events. It definitely plays an important role in the experience, especially for someone who is settling in to a new place. They may not know anyone. They don't have family or even friends from back home. So it will be very comforting to have this community that they can settle into. We want it to be their home away from home. We also see the community organically growing inside Rukita. For example, tenants are holding events on their own and contributing to them themselves, such as having a potluck dinner, having morning jogs together, and even playing games together. We find it exciting and we want to nurture this relationship.

ALAN  13:05  
That sounds very cool. Now Sarah, the real estate tech vertical has seen significant investment over the past several years, from budget hotel roll-ups such as Oyo and RedDoorz, to co-living solutions such as Hmlet and Cove, to a number of other subcategories. Where does Rukita stand out in this arguably crowded space?

SARAH SOEWATDY  13:24  
We provide full stack solutions to both landlords and tenants. For landlords, we give them peace-of-mind from our full management service. While we not only take care of their properties, we also upgrad them and give them monthly income. For tenants, we give them the ease and comfort of living that is well suited to their ever more busy lives. We give them full service such as regular cleaning of their room, laundry service and repair maintenance, which they can request from our app.

ALAN  13:57  
Understood. Now Sabrina, what do you fear most as a risk to the business? Is it finding viable properties? Is it keeping good people at the company? Is it the risk that someone much larger might come into the space?

SABRINA SOEWATDY  14:11  
It's basically not growing fast enough. Definitely keeping the quality and the customer-first mentality as we scale is important. We have many ideas on growth for Rukita, on how we want to aggregate this affordable housing landscape in Indonesia. But I think the major point now is to really focus and to make the right decisions so that the company can reach success and navigate in this pandemic.

ALAN  14:36  
Understood. Sounds like some sound priorities. Maybe Sarah, I'll start with you. You guys passed through Sequoia Capital's "Surge" program. Surge bills itself as a rapid scale-up program for startups in Southeast Asia and India. It combines $1 million to $2 million of seed capital; with company building workshops, global immersion trips and support from a community of founders. What exactly did Surge mean to you guys, and what were the highlights of the whole experience?

SARAH SOEWATDY  15:03  
You know, Surge provides a concrete foundation to our company. This invaluable experience definitely provides the much needed practical world examples that a startup needs to understand when building a company. Hearing personal experiences from unicorn founders, and even decacorn founders, also prepares us for what is coming up and what we will face, hopefully sooner rather than later. The Surge team is definitely top-notch. They are so helpful. And it has been an integral part of our journey up until today. If I can put it in a sentence: it's a priceless experience, and it's nothing short of amazing.

SABRINA SOEWATDY  15:45  
Surge for me here has been really phenomenal. The network and the mentorships that we get out of it have been so great and so real, especially in this season, whereby we need the support of exchanging thoughts and ideas on how to navigate in this ever changing marketplace. And so the talks and the sharings from other founders have also been very fruitful. It's been so real and nourishing. And it's been just really an incredible journey. So I really highly recommended for other founders.

ALAN  16:15  
Fantastic. Now guys, it's been super encouraging to see so many talented women start companies in Indonesia. What are the biggest frictions that remain for the female entrepreneur? And what advice would you give to subsequent generations of woman founders to overcome these challenges?

SABRINA SOEWATDY  16:31  
Yeah, for me, I think female entrepreneurs need to provide support for each other.

SARAH SOEWATDY  16:36  
And, you know, don't pay attention to the frictions or the hurdles. Why are we here in the first place? It's important to not get discouraged by what may be a distraction. I'm definitely blessed to have my sister, and we don't allow gender to get in the way. We see a person as an individual, and we see them for their talents and potential. It just so happens that in Rukita almost 50% of the team are females. There are also a lot of female leaders in the company. So keeping it balanced definitely helps to avoid any discrimination. 

ALAN  17:12  
Well, it's such a treat to have you join us today, Sabrina and Sarah. Thanks so much for your time and insights.

SARAH SOEWATDY  17:18  
Thank you so much, Alan,

SABRINA SOEWATDY  17:19  
Thank you so much. It's been such a pleasure.

ALAN  17:22  
Excellent. I'm definitely looking forward to staying at Rukita properties once cross-border travel resumes. Although I'm likely to be the least hip room guest in the history of the company. But I hope you'll forgive me for that.

SABRINA SOEWATDY  17:34  
We would love that. You'll be the mystery guest.

ALAN  17:39  
Fantastic. Well, thanks all for joining us for our maiden podcast for 2021. Terima kasih telah mendengarkan. Sampai jumpa lagi!