Online Managed Rentals And Why It's Gaining Significance In India

Prabhat Kumar Tiwary, CEO & Founder, YourOwnROOMPrabhat is a Stanford Business Graduate with over 23 years of professional industry experience in leadership and management at technology enterprises and startups

Demonetization, RERA & GST have disrupted the real estate market
The real estate industry was faced with two of the biggest challenges in history, the Real Estate Regulation & Development Act (RERA) and the Goods and Services Tax (GST). Both these laws have driven the black market of real estate to become more transparent and process driven. RERA aims to regulate the sectors which are unregulated and bring back strict checks on project delays and unfulfilled promises from developers. GST aims to rationalize the tax structure and bring uniformity in prices, which is expected to benefit both developers and people looking to buy new homes. The effects of these policy changes aim at long term benefits. Its true impact on the market is yet to be seen.

Demonetization, on the other hand, has also driven high transparency which in turn has resulted in poor sales, challenges with heavy liquidity and a high number of unsold properties. These are some of the challenges that are now faced by a number of developers from the real estate sector which have given way to numerous unused properties.

Unused Properties
Due to all this, there is just too much inventory laying idle. As the population in India steadily increases every day so does the demand for homes across the country. With a population touching 1.32 billion as of 2016, India has a housing market that is raking in more demand and money each day. Unfortunately, people are finding it harder and harder to locate suitable living spaces and the demand for homes seems to be surpassing its supply greatly.

In a recent article written by Anshuman Magazine, chairman and managing director of CBRE South Asia, it was cited that around 12 million completed houses were lying vacant and under-leveraged across urban India. Despite this unimaginable number, there is a huge gap between the demand for housing and the supply for them in India. In fact, the latest official economic survey stated a shortage of a whopping 20 million homes in India.

On one hand, you see there is actually enough supply and on the other, you see the housing demands of the people of India are not met. There is a huge gap which somebody is not addressing. Having said that, we see huge potential and opportunities that lies at the core of the real estate industry. In an era of technology and artificial intelligence, innovative tech-enabled businesses such as Nestaway, Oyo Rooms, YourOwnROOM are taking advantage of this opportunity to identify under leveraged property and service segments of the Indian population that are in real need for decent housing.

Millennials happen to be one of the most underserved segments in India. We've observed over the years a huge inflow of migrant millennials moving to metros for a better standard of living and job opportunities. We see a great solution in putting the vast amount of under leveraged properties to good use by serving this demand for decent homes for
millennial. These unsold properties are a great investment opportunity and should be developed or purchased immediately and sold or rented out to the people who are in real need of it.

This is beginning to give way to new type of property and that is rentals. It's moved from your typical saving of money to buy property to brokers to now online managed rentals.

Renting is so much more relevant in today's world because of multiple reasons. Here's why?
If we take a look back the last few years, the concept of renting has been strongly influenced and impacted by the concept of SaaS products. Software was usually bought by businesses to reduce capex, enhance business operations and processes. Today, software can be rented out on subscription and more and more businesses are adopting it. Oracle, SalesForce, Microsoft, Google are increasingly offering software on a subscription model and businesses (Enterprise, SME and Consumers) can choose to opt in or out at their will or convenience. This entire phenomenon is playing out in a lot of other spaces like cars, furniture, real estate and other slowly emerging utility based concepts for renting.

Renting in any form is more economical for both the seller and consumer as the consumer can fulfil his requirements at fraction of the cost and the seller can recover more than his initial investment

That being said, let's take a brief look at some new concepts of renting that have disrupted a lot of existing businesses which aim to sell as opposed to lease.

Millennial: The Growing and Demanding Demography
Millennials in India seem to be a very impatient generation who absolutely don't like to wait. In this day and age, everything has to be instantaneous. Be it work or outside, they want things done as soon as possible. Among them, there's an underlying understanding that time is money and they tend to drift towards services who deliver quicker than others. They aren't particularly fond of having their patience tested. You name it, every industry now (banking, food, transport, ticket bookings, home rentals) have shorter execution and delivery service timings.

Renting is Disruptive for the Real Estate Industry Because:
The generations of today live fast-paced lives and many people generally in the 22-35 age bracket, namely millennials, are still having a tough time settling down in a single place. Jobs and internships demand a lot from them and this comes at a cost to their home lives. Essentially, for the generations in this age bracket, investments are simply not investments. For example, purchasing a house is rarely on the minds of newly working youth. Their go-to option is renting a studio or a paying guest accommodation which can put them up for the time period that they will be at the job they start out at. Renting houses is more of a modern concept since traditionally the older generations tend to buy a house and live in it in the long term.

India has a $20 billion residential rental market consists of $13.5 billion in urban, $0.8 billion in rural, and $5.7 billion in vacant non-resident Indian property brokerage. These numbers aid the boom of the Indian rental industry and encourage investors to turn to buying and renting out living spaces.

There are many businesses which offer homes for rent in the market. On one hand you have traditional companies like India Properties, Common Floor, 99Acres,, Quickr and other such businesses. On the other hand you have new age managed rental platforms like Nestaway, YourOwn-ROOM, COHO etc. These businesses put together are all redefining the way millennials in India live.

Multiple Formats of Online Rentals for Millennials
As online managed rentals gain more popularity in today's world, we're witnessing an array of different formats of renting homes that many businesses are now beginning to offer. These businesses have catered to different segments according to taste, preferability and affordability. Millennials now have the choice to rent from homes that offer co-living (homes that offer a support system to settle into new cities), Single rooms (for millennials that prefer privacy), and family homes (for newly wedded couples).

We're slowly seeing many businesses cropping up which is aiding the gradual switch to rent. Thanks to these businesses, owners can now rent more than just properties. Furniture, cars, books, videos and even clothes are all up for rent.

Renting in any form is more economical for both the seller and consumer as the consumer can fulfil his requirements at fraction of the cost and the seller can re-cover more than his initial investment. All in all both the parties are at profit here.