- The evolution in the concept of renting in India
- The start-ups that ventured in the rental business
- Are Indians ready to embrace the concept of renting?
India has witnessed a great start-up boom during the last decade coupled with a healthy growth in the e-commerce space. People want to live a comfortable and luxurious life today with all their wants a click away. Several entrepreneurs are betting on this opportunity and launching ventures to make the life of today’s citizens more convenient. The start-ups launched in this decade have come up with ideas and system to meet this objective. The venture capitalists and private equity firms from India and abroad are optimistic about the changing lifestyle and have pumped millions of dollars on many of these ventures. A new trend that India has witnessed in the last decade is the growth of what is known as the ‘rental economy’ or the ‘sharing economy’.
The global sharing economy has grown at an overwhelming CAGR of 140% to be worth USD 250 billion in 2019 from merely USD 3.5 billion in 2012 and is further expected to reach USD 335 billion by 2025. The rental industry of India forms around 10 percent of the total global sharing economy. The concept of renting has been there in India for a long time but in the new millennium, there has been an evolution in the way renting has occurred in India. In this blog, we have explored the new trends in renting in India.
The house rental and property selling market has gone online with websites such as 99acres and Magicbricks. The concept of renting a house has been there for long though the preference towards owning a property has always been higher. However, a new value addition that we see today in this sector today is the rise in serviced apartments and co-living spaces. The real estate developers have come up with the concept of fully furnished apartments with all services and facilities such as internet, cleaning, maintenance amongst others. The young renters moving to other cities for employment or moving to a locality near the office usually rent an apartment on a sharing basis. The companies operating in the co-living industry have taken advantage of this opportunity and come up with a concept in which single rooms or beds can be rented by individuals in serviced apartments. NestAway, Zolo Stays, Good Host Spaces and Stanza Living are some of the companies operating in this space. NestAway is the largest operator in this space with 40,000 beds in its portfolio having the highest funding of USD 93 million till date. Separately, even after renting an unfurnished house in the conventional way, there is an option to rent the furniture. The furniture rental market in India is estimated to be around USD 800-850 million. The major players in furniture renting include Rentomojo, Furlenco, Grabonrent and CityFurnish. Furlenco has raised USD 45.8 million in three series of funding till date and is expected to raise USD 50 million in Series D funding. Rentomojo is the second highest funded start-up with a total funding of USD 31.8 million till date. Pepperfry, an online furniture selling Company has also ventured into furniture rental. Not only furniture but home appliances, such as washing machines and vacuum cleaners, can be rented as well from these platforms. Also, there are some companies that are exclusively only into appliance rental services. The market for electronic appliances rental is estimated to be worth USD 500 million.
The comfort of renting cabs and autorickshaws is no doubt available through mobile apps launched by Ola and Uber. However, people on an increasing note are renting self-drive cars and bikes, a service that was unavailable in India for decades despite its success in developed countries. This facility is also very useful for people who do not require a car on a daily basis but use it once in a while. Drivezy is the highest funded start-up for self-drive car rental with total funding of USD 148.4 million in 10 rounds, followed by Zoomcar with a total funding of USD 86 million. While most companies allow people to rent all sorts of cars, the company ‘Hype’ specializes in renting out luxury cars.
Furthermore, there are several companies out there, including Rent the Runway, Stage 3, StyleBank, Flont, Swishlist, and Rent A Closet, that provide exquisite and high value apparel on rent to cater to customer’s needs for special occasions. A start-up named Ziniosa specializes in renting out handbags. It is also possible to take jewellery and diamonds on rent.
The Rental economy is expected to grow but there have been various speculations about the extent of its adoption and whether it will effectively achieve the expected potential. The Indian mindset has remained biased towards owning of assets versus renting them for many years. Owning assets such as house, car, furniture and jewellery brings a sense of social status and security to the people in India. The success of these companies is partly due to the changing mindset. The target segment for these companies include students and young working professionals. Students are increasingly going to other cities for studies and renting an accommodation there. The career paths taken by professionals of today is different from the career paths taken few years ago. Young professionals, today, are increasingly switching jobs in a much shorter span of time than before and in the process, they are changing cities. Migrants form nearly 40% of the total young professionals in India. These migrant professionals are more likely to rent assets than buy them.
If you are renting for a long period of time, the financial mathematics may favour purchasing; however many companies have also come up with a concept wherein you may own the rented asset after a stipulated period of time. Purchasing with EMI may still be favourable financial calculation, but renting can be a good option for people who are looking for change and upgrade after relatively shorter intervals. People are more likely to go for higher version of products while taking renting decision than what they would have otherwise purchased. People get an easy access to higher quality and luxury products through renting and this can be a driving force for renting companies.
The stigma associated with renting may eventually fade as more and more millennials enter the work force. The millennials have a higher affinity towards swanky products and luxurious lifestyles thereby proving to be a favourable factor for these companies. However, the overall success of these companies lies in having a strong business model and maintaining a lean and well-managed inventory.