Page 85 - SHELTER

CASE STUDIES
finding tenants and renting and
maintaining the property. Rental
agencies can make a profit out
of the scale of economy and
volume. Service charges become
much lower when it’s done on a
bigger scale. About 40% of the
rent of each bed is paid to the
property owner, 45% goes to
other expenditures like services.
CoHo normally has a profit
margin of 15%. According to
CoHo personnel, at least 12-15%
profit per bed is the key to keep
the business floating. Pricing is
done after all the cost estimation
and price is kept slightly higher
in season (March-July) so that in
off-season price can be slightly
adjusted without compromising
the profit share. Location with
high demand but comparatively
low land price is more profitable
in this business model.
This format is profitable for
landowners because the rental
yield in CoHo is 8-9%, out of
which the owner gets 4-5%
which is higher than 2-3% of
rental yield in that area. Also,
they do not need to take any legal
hassle of subletting the property,
and noticeably property remains
in good condition because of
regular maintenance. Regular
maintenance is done by the
agency.
The lowest pricing for a bed in
CoHo is INR10000 per month
(Considering INR 8,000 as an
outlier). Considering that 30%
of income can be spent on rent
(while here it is added with
service), the lowest income will
be INR 30000 per month. Thus,
from the demand analysis, it can
be inferred that 94% of people
can easily afford it. However,
sharing options (Triple/double)
will vary with the location.
Single sharing being priced at
INR 20,000-25,000 per month can
be afforded by approx. 15% of
people from the demand survey.
Aggregator Model: Nestaway
Nestaway acts as an aggregator
and convenient platform for
the property owner and the
tenant. Nestaway charges a
success fee (usually 12.5% of
the rent that they collect) for a
gamut of services they offer to
owners - tenant lead generation,
lead closure, agreements, home
services during rental to move- This model
out, and finding a tenant again.
They deduct 12.5% of the rent
of each bed every month and
pass on the remaining to the
owner. They have a mandatory
6 months lock-in period.
Rent of one bed in Nestaway
is dependent on market price.
Maximum rent in the current
market scenario is INR 11,000
/ month (without any service)
for double sharing, and the
same aligns with demand
survey findings also. Nestaway
operates in a completely asset-
light model and has quite a wide
October 2020 Volume 21 No. 2-SHELTER 83
range of market penetration. In
this model, rent is only related
to the market rental price of the
area and consists of very little
service charge. Location with
high land price combined with
higher rental demand is much
more profitable (Noida is an
example) for the property owner,
but for Nestaway profitability
comes from the volume of
beds. There is no brokerage,
but a 12.5% monthly charge is
deducted from the rent which
seems insignificant, but it is 1.5
months of rent while taking one
year as standard time. Hence it
is a business model that seems
like making less profit but when
taken the whole picture they
are running most successfully
among the three models.
is better for
landowners as rental yield is
better than the average market
yield. In the case of low-cost
location, the yield is 1-2% higher
than the average market yield
but in the case of prime locations,
it is almost 5-6% higher. All the
legal procedures are taken care
of by Nestaway. Nestaway gives
a ‘rental default guarantee’ to
property owners so in case any
default occurs from the tenant’s
part Nestaway will pay the
rent. Additionally, foreseeing
any spends on damage to the
house, Nestaway also provides