You’ve heard of Software as a Service (SaaS), but what about Rent as a Service? This innovative concept is the brainchild of Bengaluru-based tech entrepreneurs, Vijeth Reddy and Sangeetha Holiyachi. Their startup, Kots, is redefining the rental market by targeting a younger demographic, specifically those around 30 years old, and focusing on institutional rentals rather than property sales.
Addressing the Gap in Urban Rentals
Traditionally, the urban rental market in India has overlooked one-room or one-bedroom units due to low profitability. Reddy and Holiyachi took a different approach by focusing on demand, particularly around IT hubs in East Bangalore. The COVID-19 pandemic surprisingly doubled their business growth. Their properties come equipped with amenities designed to appeal to the modern, tech-savvy urban dweller, from high-end appliances to lifestyle services. In response to changing needs post-pandemic, Kots has expanded its offerings to include studio apartments and small two-bedroom units.
Strategic Location and Amenities
Launched in 2019, Kots initially positioned itself as a unique co-living service provider. They discovered that properties within a 5-km radius of IT hubs attracted tenants willing to pay for premium facilities. These units come fully furnished and offer a range of amenities, from security features to on-call food and water services, all managed through a single app. Additional perks like laundry services, gyms, and clubhouses make these units even more appealing.
Bridging the Demand-Supply Gap
Data from Google searches revealed a significant demand-supply mismatch in areas like Whitefield, where thousands were searching for one-bedroom units but only a few hundred were available. Kots capitalized on this gap with a well-planned strategy. They offered landlords a nine-year guaranteed rental income for custom-built one-bedroom apartments, attracting small landowners over large developers. This approach not only assured a 6% return with a 4% annual increase but also added value to the property through lifestyle amenities, making the deal more lucrative for landlords.
Expansion and Future Plans
Currently, Kots manages 12 projects, each with at least 40 units, and a total of 700 units in key areas of East Bengaluru. They aim to increase this to 1,000 leased apartments by March 2024. The tenant base, primarily composed of IT professionals, adds a layer of financial security to the model. A standardized online system ensures smooth operations, with tenants required to pay rent in advance and given a 30-day notice if unable to pay.
The Untapped Potential of Affordable Rentals
While Kots has successfully tapped into a niche market, there’s still a vast, untapped potential for affordable rental housing in India. With appropriate tax incentives and policy changes, this sector could become a significant revenue generator in the Indian real estate landscape. As Kots continues to innovate, it faces the prospect of increased competition, but with risk mitigation strategies in place, the future looks promising.