I think it totally depends on two things, 1 The available space 2 Your religious belief. Someone who is very religious may try to squeeze a separate space even in tiny flat, while someone who is not overtly religious may just have a small corner with Idols in spite of being in a position to have a separate room.

Dear Shraddhanjali, Do you want to have an open Puja room or want to create a small room for the same?

One of my clients had no designated space for puja in their home, and they would have had to squeeze it into a passage somewhere. So when they came to me for ideas, I noticed in the floor plan that they had a beautiful covered verandah overlooking a private garden. The wall of that verandah was towards the east side of the garden. So I thought- why not carve out a rustic simple puja space here? Outdoors? The client was game. And this was the result- a 2'-0" x 2'-6" wood panelled niche in the wall, with a simple clay Krishna placed on a wooden bracket with a delicate hanging brass lamp

Many people these days opt for puja room in guest bedrooms, due to limitation of other spaces. Since living room while entertaining guests there is alcohol consumption, non veg food, dancing, so it could be more disgraceful than a guest room. So, I guess that's fine. I am suggesting the bed on the west wall (the headrest on West Wall) so that you are facing the east (that's Vastu compliant). The bed goes where the wardrobe currrently is. The temple on the North wall with the Gods facing South or West wall with Gods facing east. Rest you could add a bench under the window for seating while enjoying the sunlight and a console on the South wall.