A new breed of startups wants to solve problems of house renters

Migration within the country has nearly doubled in the last decade and as a result, rental accommodation across metros has been growing exponentially.

This is something that caught the attention of several entrepreneurs in the past couple of years resulting in a bunch of them starting companies to cater to the 68% of millennials who are taking up rental accommodation in India.

Right from startups like Commonfloor (founded in 2007) to Housing.com (2012) and PropTiger (2011), there was a slew of startups that did home rentals and even home buying. Their fight was against a large unorganised market comprising real estate companies, brokers and house owners themselves and their only USP was technology and convenience of finding homes with a click of a button.

But like most startups around the time, money was burnt on marketing and soon their downslide began. Quikr acquired Coommonfloor in a $1.5 billion deal in January 2016. A year later, PropTiger bought much-troubled Housing.com in a $700-750 million deal.

According to a report in the Financial Express, these online real estate companies collectively reported losses of Rs 762 crore in FY16, which is a 65% jump from the year before.

While these companies still exist, the market continues to remain underserved. This has resulted in a new set of startups emerging to solve more specific needs and issues of those seeking rented houses.

Homes for singles

A Housing.com or PropTiger may offer services of search, virtual viewing, site visits and more. But needs of customers go beyond that. One such issue is finding fully furnished homes, another major issue has been with singles finding decent homes to rent without facing resistance from house owners.

This need is huge. It is estimated that there are 1.5 million white collar migrant singles across the six metros in India.

There are nearly 12 million vacant apartments in metros. According to a Knight Frank report, there are over seven lakh ready and unsold apartments in metros.

Startups like Bengaluru-based Nestaway, YourOwnROOM, Homigo and Hyderabad-based Smart Livein want to solve this.

With its main campaign as ‘#HomesThatDontDiscriminate’ Nestaway helps customers find, book and move into a rental house. With a focus on singles and affordability, it provides support to tenants, right from moving-in to the new house, paying the rent to maintenance services.

“We charge only two months of security deposit with zero brokerage and makes the transactions completely transparent through the app,” says Ismail Khan, Senior Vice President and Business Head, NestAway.

Similarly, YourOwnROOM takes furnished apartments and houses from owners and offers single rooms or beds to tenants giving a co-living home for singles.

“We realised that there is a significant hand-holding required for owners and tenants for things to happen. You don’t need a housing.com or Commonfloor to just find places. We saw a huge need and opportunity to handhold tenants and even owners and help them find the kind of place they need,” says Prabhat Kumar Tiwary, cofounder, YourOwnROOM.

Prabhat Kumar Tiwary and Sachin Joshi of YourOwnROOM

These startups even work closely with owners to help them find tenants.

Nestaway takes care of end-to-end property management, provides assistance in rental agreements and other documentation and have verified move-outs.

While Nestaway gives users an option of picking between fully, semi and unfurnished homes, YourOwnROOM's core business is having an arrangement with owners to ensure the house is fully furnished. It gives them an option of furnishing the house or helps them rent out the furniture for which it has tied up with some startups.

Founding team of Nestaway

This is also similar to what Smart Livein does.

It rents the flat on behalf of the owner and takes the responsibility of bringing it up to the standards of the tenant and ensures everything is in place before they move in.

However, in addition, Smart Livein even takes care of amenities inside the house like internet connection, maintenance services and value added services like helping your children find a school.

An added advantage with these startups is that they even take care of monthly rent collection. 

Moreover, the advantage they give to house owners is that they ensure quality tenants with background checks in place.

“We do a thorough KYC and Reference Check. We ask for Photo proof, address proof - PAN, AAdhar, Passport, Employment proof. We also ask for two references and conduct a ref check through our Technology Platform,” says Prabhat.

Bringing in the bucks

Nestaway and YourOwnROOM have a business model where they charge a commission. NestAway charges an approximate of 12.5% on each rental agreement. It varies from house to house.

YourOwnROOM charges 14% commission on the rent. Meaning, when they collect rent, they keep 14% of the amount and pass the rest to the owner.

However, Smart Livein charges the owner a commission of around 15% if they provide a fully furnished home. Instances where Smart Livein furnishes the house, they charge a 35% commission.

Team of Smart Livein

Scale and sustain

Ramesh Loganathan, Chief Innovation Officer (interim) of Telangana says that while there is always an opportunity in the rental space, execution is key.

“There have been many startups in rental but somehow most of them haven’t clicked well. A lot of money is definitely spent here. People are ready to pay to find a house. So there is a market. The problem is not a model one but execution problem. People think they can just build an app and people will come. But why should they? Value add is very important here, also because there is an entry barrier. Technology cannot be the only differentiator,” he adds.

Ismail says, “Connectivity, convenience and security of a neighbourhood are some of the most important factors for millennials in today’s time. For them, buying a home in a good area sometimes go beyond their financial capability thus leading to an increase in demand for rental housing spaces. Design and technology will be the main factors that will help companies find the right rental solutions for today’s millennials.”

To tap into this market, companies are coming up with rental solutions that provide all the basic amenities to the millennials while keeping the costs at a minimum.

Prabhat says, “When looking for a house to rent there are two three things they look for - a place close to office, good properties with amenities like gym, swimming pool. So we only look at such properties ensuring there are wardrobes, all fixtures, utensils in a given flat.”

In this space, Nestaway is currently the largest player, having started two years ago. It has 27,000+ tenants and 11,000+ houses with a presence across Delhi, Gurgaon, Noida, Bangalore, Ghaziabad, Hyderabad, Pune and Mumbai.

YourOwnROOM, which does single beds in houses has over 350 active beds across Bengaluru and Pune, and plans to have over 1000 active beds by the end of this year and enter markets like Delhi and Mumbai next year. Prabhat says the focus is to first fully cater to the current two cities before expanding.

While Nestaway didn’t want to share revenue numbers, YourOwnROOM is operating at an annualised revenue run rate of around Rs 1.5 crore and wants to a revenue of over a million dollars next year.

As on May, T-Hub-based Smart Livein had around 100 apartments in Hyderabad listed on its platform and found homes for over 300 customers since launch in October 2016.

The rental housing market has a lot of potential in the future. With the urban migration increasing, and people opting for renting houses rather than investing in properties, the market is growing daily

Prabhat agrees with Ramesh. He says that while growth may sound tempting, what’s more important is the operational fabric that enables this. It is important to ensure customer support and sales engine is right.

The market is still largely unorganized. And while the market is there to explore, Prabhat says that there is an opportunity for two or three companies to be serious competition to market leader Nestaway and that is where he wants to be.

This article has been produced with inputs from T-Hub as a part of a partner program.