Today, these two missed opportunities have a combined valuation north of $100 billion. Flipkart, valued at $21 billion, is synonymous with Indian e-commerce. Uber, with a valuation of $82.4 billion at the time of its recent IPO, is the flag-bearer of the sharing economy.
The rental economy is a product of the times we live in. To millennials, jobs are less permanent than they’ve ever been. According to a survey by jobs site Indeed, 56% of urban employees changed jobs at least once in 16 months, and at least thrice in the past 10 years. In the hunt for better paying, more appealing jobs, people are willing to move to job centers far from home.
What are the qualification criteria?
Putting down roots gets even harder when you consider that real estate in most large metros is prohibitively expensive. Take Mumbai, for instance. According to the home purchase affordability index put out by real estate services firm JLL India, the average annual household income in Mumbai falls well below what is needed to qualify for a bank loan for a 1,000-square foot apartment. This, despite Mumbai’s wages growing faster than anywhere else in the country. Unsurprisingly, homeownership fell to a seven-year low in 2018.
Add to this the fact that consumer durable loans were not easily available in the financial year ended March 2019, and you have the perfect pitch for the rental economy. With both jobs and residence increasingly transient, and even bank loans harder to come by, ownership is losing sheen.
“Typically, people change jobs and houses every once in 1.5-2 years. So their lives are not entirely predictable, and EMIs is a commitment you can’t break out of,” said Geetansh Bamania, CEO of rental platform RentoMojo. Rentals, he adds, allow for flexibility.
Wide range of options available
Rental companies are banking on this, pushing the model as a far more convenient option. A hybrid of ownership and pay-as-you-go is taking shape in India thanks to RentoMojo and its competitors like Furlenco, GrabOnRent, and Guaranteed. Now, even manufacturers like electric two-wheeler maker Ather and water purifier maker Livpure Smart are getting in on the act. Yes, in the millennial world, even utilities are rentable.
The benefits are legion—use a product for as long as you want, without the bells and whistles of maintaining it and selling it. “I don’t mind buying new. It’s what you do with it when you want to get rid of it, which makes renting easy. The second-hand goods market is not evolved enough to get rid of goods easily,” says Satyajeet, a 29-year-old who moved from Pune to Bengaluru to work for an e-commerce company.
In the West, subscriptions and rentals have been a logical progression as people are already familiar with the concept of leasing cars. More than one in four new cars in the US is rented. So it is not entirely surprising that a three-year-old SoftBank-funded car subscription company Fair has already raised $500 million. Rent the Runway, a 10-year old clothing and home décor rental company, has also managed to hit a $1-billion valuation.
In India, renting is a 7-year-old phenomenon in its nascency. Rental companies here have raised only $426.82 million in funding, according to data from startup tracker Tracxn. Its users, according to industry sources, number around just 1 million (as opposed to 150 million for cab aggregator Ola).