Just Rent It: Rental economy is here to stay, here’s why
Posted by Avis on January 27, 2020|
The current market size for furniture rentals in India is estimated to be $800 million as per studies.
Finance minister Nirmala Sitharaman’s remarks linking millennials’ preference for Uber and Ola cabs to the auto sector crisis had created quite a flutter on social media a few months ago. Twitterati went into a frenzy, with users flooding the site with sarcastic hashtag #BoycottMillennials.
We don’t know whether it’s the millennials to blame or just the times we live in, but it’s a fact that most people in their late 20s and early 30s are not only renting transportation services, but also houses, furniture, electronics, clothes and accessories. While renting a house may be a need for most people, as it’s a big gamble for a young professional to buy a house, especially if she is in an industry where job security is fragile, and sky-rocketing prices of real estate making it no easier, a whole new ecosystem is emerging for rentals of all kinds.
Additionally, delayed marriage and child-raising, lesser inclination to block funds and increase in spend on travel, food and leisure translate to greater demand for rentals for the younger generations. Earlier, these expenses were considered discretionary, but this trend is now a way of life.
This seems to make even more sense when you see that young urban Indians are often switching cities for work, making rentals a practical option as well.
With a rise in consumer awareness, ownership is gradually paving the way for on-demand services across industries— from car sharing to video-streaming. The fashion industry is also walking in tune with the trend, showing signs of shifting away from ownership. This is disrupting the industry majorly and our relationship to clothing. Earlier this year, Rent the Runway entered the unicorn club with a valuation of $1 billion and Jack Ma as an investor. In the West, it is a common practice to rent clothes — be it for a fancy occasion like weddings or just for a Sunday brunch out.
A 2019 report by Allied Market Research says the global online clothing rental market garnered $1.01 billion in 2017, and is expected to reach $1.85 billion by 2023 — registering a CAGR of 10.6% from 2017 to 2023. The market in the Asia-Pacific region is expected to grow at the highest CAGR of 11.5% between 2017 and 2023, led by India and China.
A house on rent
As per a survey by real estate research organisation JLL Research, 93% of migrant millennials in India’s top seven cities live in rented accommodation and 60% of them said they didn’t have any plan to buy a house in the future or were unsure about it.
The Economic Survey 2016-17 had also stated that migration had doubled from five-six million a year during the 2001-11 period to almost nine million a year in 2011-16. The draft of the Model Tenancy Act is also expected to pave the way for sustainable, transparent and inclusive rental housing market in the country. A thriving rental market is important not only for workforce mobility, but is very relevant in a country like India, where a significant chunk of the population earns its living from informal sources. Such groups do not qualify for mortgages.
A large section of the migrant millennial population has cited budget constraint as the biggest reason for not owning a house. Flexibility (ownership of a house restricts movement to other cities in case better opportunities arise) is the second most important reason. There has been a change in the nature of work as well. The short-term nature of assignments warrant higher mobility and flexibility.
Anuj Puri, chairman of ANAROCK Property Consultants, says factors driving property ownership have also changed over time. “Unlike earlier, when people’s quest for property was limited to getting financial security or ROI, it has now moved to people’s desire of diversifying their investment portfolio,” he explains. Additionally, it is also true that one’s outlook on life changes as one ages. While millennials in their late 20s or early 30s may prefer to take everything on rent, when an individual in India enters her 40s, a yearning to settle down invariably creeps in. Hence, age is also playing a significant role in property-buying today. Besides, the status perception associated with home-ownership is also gradually fading.
Data reveals that nearly 37 million students are pursuing higher education in India, of which an estimated 11 million seek accommodation. The current student population enrolled in professional courses is estimated to be 6,60,000, of which 3,06,377 need a place to stay. Evidently, there is a massive supply-demand gap that can’t be bridged by PGs or hostels alone.
Also, with more youngsters moving to Tier-I and metro cities for better career prospects, the demand for rental homes is now higher than ever, and this is where co-living accommodations and apartments like Bengaluru-based Grexter come to play. Grexter Living is different from a rented house in many ways. Co-founder Parul Gupta claims that Grexter Living doesn’t discriminate against home-seekers on the basis of gender, age, race or sexual orientation. Everyone, irrespective of their background, is welcome on board. Secondly, they charge a deposit of only two months’ rent as opposed to 11 months’ rent, which is the norm in Bengaluru. Lastly, they don’t enforce any regulations and as long as the residents are not invading the privacy of others, they can invite their friends and family members.
The potential for growth in the student housing space is huge as the market size is estimated to be $15 billion with more than 18 million students across India migrating to cities every year to pursue their academic dreams. However, student housing today suffers from a high level of fragmentation, lack of quality solutions, price transparency, reliability and complete lack of tech enablement of processes. Brands like Oxfordcaps are addressing this gap and aiming to meet the demand. “We provide a customised product with a full-stack model of services and amenities, including WiFi, laundry, nutritious meals, professional housekeeping and an array of events and activities focused on career development and lifestyle for our students,” says Annu Talreja, CEO of Oxfordcaps, a student accommodation provider.
Accommodations like these seem to be ideal for people who want to avoid intrusive landlords or judgmental housekeepers, and live in peace without having to burn a hole in their pockets. Then there are accommodations like Bengaluru-based Colive, which are consciously being planned around major tech parks and business hubs to give residents all sorts of conveniences, including easy commute options, in cities where rush-hour traffic snarls are a norm. Colive, a technology-enabled network of fully managed, ready to move-in homes, ensures that its customers can explore from a wide range of options available on the Colive website or the app.
Suresh Rangarajan, co-founder & CEO of Colive, says there has been an increase in demand for shared spaces due to several urban housing challenges. “Expenses just pile on when you are staying on your own. The benefits of a shared economy are many — having somebody to share your daily expenses and charges for amenities that are not used regularly like washing machine, kitchen equipment and essentials.”
Say no to owning
The current market size for furniture rentals in India is estimated to be $800 million as per studies. They indicate that around 150 million people aged 18 to 35 years live on rent in Tier -I and Tier -II cities and a majority of these youngsters are inclined towards furniture renting.
“As of now, the growth and demand for online furniture rental that we have mostly witnessed is from metropolitan cities like Delhi-NCR, Mumbai, Pune, Bengaluru, etc. However, Tier-II cities are also catching up with innovative businesses in terms of rental volumes,” says Sidhant Lamba, founder, Fabrento, a furniture rental company. Fabrento provides access to trendy furniture for rent at affordable prices along with free delivery, setup and installation.
Other brands like Furlenco, which started in Bengaluru and now has subscribers in Delhi, Mumbai, Chennai, Hyderabad, Gurugram, Noida and Pune, are offering quality furniture — stylish and high on utility— at a fraction of the cost of buying. Furlenco delivers it for free in 72 hours and also transport furniture for free between cities in its network. “Our subscription offers free annual cleaning services with the option to swap design or styles. So for us, it is not just about renting furniture, it is also about building a subscription ecosystem that can make the entire experience of setting up a home convenient and even enjoyable,”says Ajith Mohan Karimpana, founder and CEO, Furlenco.
And mobility is not just about hailing a cab, but renting transport too. For instance, car rental company Zoomcar has removed the entry barriers that exist in the traditional car ownership model. With compelling features like zero down payment, no loans or maintenance and insurance costs, 90% of the consumers are non-intenders — people who never thought of owning a car, despite in need of one. While the car is made available at a nominal monthly subscription cost, users have an option to offset nearly 70% of it by sharing the car on short-term rental by listing it on Zoomcar when not using it. Together, the services make accessibility to cars easier and more affordable — two most crucial driving forces. According to Greg Moran, co-founder and CEO of Zoomcar, the increase in short-term, self-drive car rentals can be attributed to ‘accessibility over ownership’ mindset that drives much of the choices made by the millennials and Gen Z, who constitute the biggest pie of Zoomcar’s consumers.
“Millennials are early adopters of the sharing economy and therefore renting a chauffeur-driven or a self-driven car has seen an increasing trend over the last couple of years,” says Sunil Gupta, MD & CEO, Avis India, a car rental company. The brand has seen good response from south India and Mumbai and Delhi NCR.
Not just cars, today you can also rent bikes and go on an adventure trip to the Himalayas. Samar Sodhi, chief experience officer of EagleRider, India, observes that it’s convenient and hassle free. On-the-spot decisions help outgoing travellers to rent a ride when in a different city. Even if one is not using one’s personal bike, up-keeping it for a ride takes a lot of effort. In accordance, bike rentals have come of age because of their convenience.
From bikes, zoom to the fashion industry. The sector has seen its fair share of demand in the rental economy. Delhi-based wedding dress rental service Rent It Bae was the first to introduce an unlimited fashion subscription model in India, which they call the ‘Netflix of Fashion’. They came with a solution to the problem of “nothing to wear” in an economical way with a vast wardrobe to choose from. Aanchal Saini, co-founder and CEO, Rent It Bae, realised that some people are sceptical of renting clothes that have been worn before by strangers and so, to overcome this challenge, Rent It Bae has always regarded hygiene as its top priority. Outfits are dry-cleaned and jewellery is sanitised as part of its basic service.
Also, Saini acknowledges that influencer-marketing is a great idea and extremely relevant today. Consumers are religiously following bloggers, influencers and celebrities, who play a major role in establishing fashion trends and creating a market. Renting pans out well for those who wish to crack the celebrity style or look.
Accessories accentuate your look and handbags play an important role there. But how many women can afford multiple luxurious handbags?
Varun Ramani, co-founder of Ziniosa, which rents luxury items, has the answer. He says handbags constitute the second-largest segment in the fashion market, and the need for the perfect handbag for the perfect outfit is always overlooked by designers. “Urban millennial women care about handbags and phones as their most-valued accessories and the market has a huge gap that needs to be addressed. We hope to capture a significant portion of this $400-million handbag market,” asserts Ramani, adding, “The advantage of renting bags is that one size fits all. Quality analysis and sanitation are straightforward processes as opposed to other fashion products like gowns and lehengas. Women need only one or two bags for their daily use and can avail Ziniosa for all their big occasions without spending thousands.”
Another brand, Stage3, offers over 2,000 pieces from top designers in the country, including Abhinav Mishra, Arpita Mehta, Abu Jani & Sandeep Khosla and more, besides accessories like bags, belts and jewellery from designers such as Sabyasachi, Outhouse, Amrapali and Aanchal Sayal, among others. “Another way to promote renting is by expanding our offline footprint and opening stores that allow customers to touch, feel and then rent. This gives them a chance to see the quality and condition of the outfit in person. Currently, we have two stores in Delhi and will be opening one in Mumbai soon,” says Sanchit Baweja, co-founder and chief business officer, Stage3. He feels men, compared to women, are even more open to the idea of rentals. “Men are more style- and fit-conscious instead of designer labels.”
Youngsters — studying, working or residing away from their homes — show trends of renting and buying, depending on which part of the country they are residing in and other circumstances. Besides buying and renting, a third option is becoming popular by the day — option of buying from second-hand markets or online platforms like OLX and eBay.
Noida-based 28-year old Aditi Chatterjee, who works at Pearson, claims that while she prefers rented accommodation for now, she wishes to get a place of her own after marriage and once she climbs the income ladder. Bengaluru-based software engineer Arnabjyoti Kalita (28) recalls having a hard time getting back his deposit from the landlord. He wants to pursue higher studies abroad, and is not too keen on buying a house of his own. “I want to travel, see the world and don’t think buying a house or a car fits my future plans,” he says. Vizag-based research scholar Sanchari Biswas (29) isn’t too keen on renting an air-conditioner or fridge. “I am sceptical because they may have defects that I discover later.” But she is more open to the idea of renting bikes.
Berlin-based 34-year-old media professional Sreya Chatterjee, who used to live in Mumbai, changed her accommodation thrice during her six-year-long stay in Mumbai. “All three flats were unfurnished. I bought some basic furniture and rented a cooler from Rentomojo in summer. It was a cost-effective, short-term solution as I was not sure how long I would stay in Mumbai,” she says.