If it were me, I’d be leaning more playroom vs lounge room given their ages - I would add closed storage for toys, with an art table/supplies or a train table

Remove all electronic items like the shredder, Roomba, and the planters with the rocks. Take cues from photo posted adding soft rug or carpet.

If the original poster is English they likely lean family room/living room when they say lounge.

@liliana40 you have some nice color with the blue seating. Then you have what looks to be neutral carpeting leaning pink. The trick is to pull together a color scheme with blue and pink. With the blue and pink, the balancing color could be yellows. Does that seem like an agreeable color scheme for you?

The kids will want is a little table and chairs like this one, and this light wood color is compatible with the yellow part of your triadic color scheme: https://www.amazon.com/Brelley-Adjustable-Graffiti-Non-Slip-Multi-Activity/dp/B0B5T2JLG3
​

If you want to paint your walls, choose one of your three colors: a beige leaning towards taupe to go with your pink carpeting, a creamy off-white to go with your new yellow part of the spectrum, or a lighter version of your blue. I'm guessing you might favor the taupe or cream, based on neighboring rooms.
​

If that isn't colorful enough for you, an alternate option would be an analogous color scheme bringing the pink and blue together with what is between them: purple. You could still have taupe or blue walls. You could add dark wines, dark chocolate, and blue-violets from navy to periwinkle to bring it all together. Two of these sets could help keep the peace someday and the tables could serve other uses later on: https://www.amazon.com/Delta-Children-MySize-Included-Chocolate/dp/B076MNRK8V
​

That's less traditional, and a bit more exciting, so let me know if you want to try it, or if you like the other more traditional approach.
​
​You might like a round or square ottoman to sit on with them while you help them with their drawings and puzzles. Those can be storage containers. You might like a toy chest. Maybe you'd like some comfy throws/blankets to snuggle in while you read to them on the loveseat. Maybe a low book case they can't topple over. https://www.amazon.com/Sauder-420178-2-Shelf-Bookcase-Oiled/dp/B01GQFZEPI These are all opportunities to augment your chosen color scheme.

Will you have a television in this room or do you want to focus on Grandma time?

​

You need to define lounge area it would seem. Do you want a quiet place for them while the adults chat? So large all consuming TV or a playroom where they can hopefully entertain themselves? I hope you are leaning to a play area. Screen time is plentiful in their lives.

Have you asked the parents for suggestions on content if being used as a playroom. They are very young, so be prepared to adjust/configure to meet needs and you’ll find cozy won’t be as important a factor.

If using to curl up to read/a few toys/storage, cozy will be important. First decide on seating and its configuration and choose a color scheme that resonates with you. Paint room and add accessories that are fun.

Can you define what a lounge for toddlers means? Is this a play space or somewhere you want to read books with them?

You already have the essentials - cozy rug and cozy sofa.

Remove everything but the sofa. Replace the sofa throw pillows with some fun throw pillows. Hang fun art on the walls. (Animals are always a great kid theme.)

Place baskets of books on the floor to encourage reading. Have lots of throw blankets to encourage snuggling and fort making.

In the corner where the white chair and shredder reside, get some shelves with bins for toys.

On the far wall, layer a rug that encourages play.

As they grow up, swap out toys items that appeal to their older selves. And make this a space they can play alone in, a secret hide away from adults.

I agree we need info but color is easy but the needs are what we have to understand.. No fake plantss for sure and probably storage for toys to avoid the whole house filled to the brim with toys . We had special toys only at our house so the grandkids were allowed to play but all toys put away before bed . They did that with no issues BTW and a good lesson to learn always. The space looks small so tell us what you need to make this work The kids will grow fast so do not spend a lot on stuff for tiny ones .