By Jitendra Jagadev
The Indian home rental market has grown by leaps and bounds over the past few years in major cities. Online home rental space in India has expanded in the recent years as it provides a practical solution to the needs of customers.
The advent and popularisation of e-commerce in India sowed the seeds for the development of the online rental market. Finding houses on the digital platform turned out to be a major boon for the customers as it drastically reduced the time required for searching houses with no security deposit. Customers can easily search for apartments within their price range which meet their preferences. Additionally, they don’t have to travel from door to door to view apartments at the mercy of brokers. Through online home rental start-ups, customers don’t have to maintain contact with their landlord, making it hassle-free to rent. Furthermore, previously renters had to shell out over 10 months of rent in form of an advance payment to secure their apartments, not to mention pay exorbitant rents as good flats were hard to find.
The launch of the Real Estate (Regulation & Development) Act, 2016, ushered in changes in the sector of real estate. Majority of the target audience looking for apartments seeks mid-premium level housing, although, with the ever-increasing property rental rates, millennials demanding more products and services without the burdens of ownership. Some home rental start-ups also offer fully furnished houses making it more convenient for city hoppers. Younger people looking for apartments can also avoid discrimination on the basis of cultural differences, eating habits, marital status by seeking apartments online.
According to experts, the supply side of this equation is being driven by Non-Resident Indians (NRIs). Many homes in India has many homes were previously locked away by NRIs who were fearful of their homes being misused by real estate brokers. However, with online rental start-ups giving they have legal assurance about the usage of their property as well as assured returns, leading to an inflow of apartments on the market. Nearly 70% of the houses now under the network of home aggregators belong to NRIs.
Historically, the home rental market has a rental yield of 1-2%, thereby, discouraging house owners from opening their properties for tenancy. However, with the organised nature of the online market, rental yield has increased attracting more players. Home rental startups generally deliver 20-50% higher returns compared to conventional brokers.
Migration of people has been a major boost in the growth of the rental industry. As per the 2017 Economic Survey conducted by the government, migration has almost doubled to 9 million between 2011-16 from 5.5-6 million between 2001-11. According to the survey, the urban housing shortage in India in 2012 was estimated to be almost 19 million homes, with the vast majority required for lower-income households.
There is a need to reform the rental market and repeal of the Rent Control Act to help support the industry and its customers. Today, 377 million urban residents live in over 7,900 urban settlements and every year, millions move to towns and cities, or dense linear settlements along national and state highways. As the country urbanizes further, it is essential to use rental housing platforms as a viable solution to the housing conundrum in India.
Jitendra Jagadev is the co-founder and Chief Operating Officer of NestAway Technologies