The concept of living is changing in India. Many married millennials prefer to stay in a rented apartment than spend a few lakhs to buy a house, probably following the learnings of famous writer Robert Kiyosaki. He explains that a ‘house is not an asset. It’s a liability’ in his bestseller ‘Rich Dad Poor Dad’.
It seems millennials now have taken the concept of light asset living to another level, and prefer to not rent the entire place but rather inhabit a co-living space.
Sanchal Ranjan and Saurabh Kumar, two friends, were observing this changing pattern. Ranjan, who was working with KPMG, roped in Kumar, an IIT-Kanpur engineering graduate and serial entrepreneur, to offer a new kind of accommodation solution to people.
The city of millennials had a huge demand for such kind of living arrangements.
In May 2015, the duo launched ZiffyHomes in Gurugram. The initial business model was based on subletting, where they took the property on lease from owners and sublet it to others. However, it now works on a revenue-sharing model with owners.
ZiffyHomes calls itself a service provider platform, which provides individual rooms in furnished apartments to suit urban needs and taste.
The platform charges a certain percentage of rentals to house owners in return of managing their property for rental purpose. This includes furnishing of the premises and fixed rental revenues.
“If the property is furnished by us, we charge 30 per cent as commission on the total rent. However, if house owners furnish the property themselves, we reduce the commission to 15 per cent of the total rent,” explained Ranjan, Co-founder and CEO, ZiffyHomes.
He added that because of the business model which works on early revenues and the company’s unit economics, they could generate enough cash to make the business function without external funding till very recently.
However, when he decided to grow further and accelerate the growth plans, he raised seed funding of Rs 2 crore early this year from angel investors such as Bikky Khosla (CEO at TradeIndia.com) and Anirudh Agarwal, Managing Director at Shree Sharda Group.
They launched the platform with 3 properties. Since then, they have been adding 20 per cent inventory and tenants on month-on-month basis. Today, there are over 500 variety of properties to choose from in Delhi-NCR.
As on date, the outfit is catering to more than 1,500 millennials. In the past two-and-a-half years, it has offered its space to more than 15,000 customers with an average period of 6 months.
Besides, it has more than 40 per cent inventory occupied by female candidates.
“We assure a safe and secure environment, along with on-call support for assistance required during their stay. However, the concept is not to create PGs but to provide a proper independent co-living platform for like-minded people,” said Ranjan.
In February this year, ZiffyHomes acquired FellaHomes, a managed home rentals platform, to further expand offerings in the space.
It wasn’t easy
It was, however, never easy to achieve the current growth. They had to face challenges in the form of creating market awareness for both tenants and owners.
Ranjan and Kumar had to do a lot of work to pursue house owners and get them to agree to such kind of models. They, initially, pumped in some Rs 30 lakh from their own pocket to build fully furnished houses. The successful completion of the project later appealed to owners and made them flexible enough to adopt such kind of rental model.
Another difficult part was to reach out to consumers, but they managed to do so through their unique offerings.
Eyeing the future
The startup aims to expand its operations. Besides, it also plans to introduce a ‘hub model’ of accommodation, which would be branded as a different subset of ZiffyHomes.
“The idea is to increase our offerings and cater to all segments such as working professionals, bachelors, students, lower and higher income groups. People from these segments will have options to choose from our different offerings. It would help us better cater to the needs of the millennials,” said Ranjan.
There are several players including StayAbode, ZiffyHomes, CoLife and CoHo, among others, operational in the space.
However, Nestaway outnumbers other players when it comes to scale, growth as well as funding.
It has raised nearly $100 million. Last week, it announced raising $51 million (about Rs 330 crore) from investors including Goldman Sachs and a joint venture firm of noted industrialist Ratan Tata.
Ranjan believes the landscape is big enough for everyone in the sector. The co-living space segment has not even captured 1 per cent of the real estate rental sector.
“ZiffyHomes is the next biggest competitor of Nestaway in Delhi NCR and we plan to take the heat for being the biggest one in the coming one years,” concluded Ranjan.