Nestaway isn’t afraid of Oyo

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He smiles and waves us away.

“No, man. I am not really worried. You can’t really think too much about these things”

It’s a warm afternoon in Bengaluru. His office isn’t air-conditioned. Occasionally, people pop in to give him updates or to remind him about meetings. With a smile on his face, Nestaway CEO Amarendra Sahu remains unflappable.

If you were the incumbent market leader in the fragmented shared rental business in India, and a giant competitor with far more funds and a solid brand was planning to enter it, chances are you would be a little hassled. But not Sahu.

Keeping Calm

There are good reasons to remain cool. You may not have heard much about it, but Nestaway Technologies, a property management service company, is one that’s done something fairly special. It’s one of the few tech companies that has made significant inroads into the real-estate sector. Several tried and either failed or struggled, and finally merged with larger entities. Housing. Common Floor. Grabhouse. The rental business is a tough business. But Nestaway broke through. Through a combination of smart services, the right value proposition, and careful, targeted expansion, the company now sits at the top of the shared rentals business in India with 25,000 homes on its platform across eight cities, with a revenue of Rs 25 crore ($3.39 million) last year. Where many floundered, Nestaway succeeded.

Market sizing is more art than science, but the 2011 census states that nearly 31.56 million people rent homes in urban India. Most of them served by brokers and middle-men, fragmented all over.

That gives Nestaway a little less than 0.08% market share. And, until very recently, there was little competition from a monolithic player. It looks like Nestaway is one of those companies that has found itself in the rare position of being in the right place at the right time, with a huge potential upside ahead of them.

Others seemed to think so, too. Last year, investors pumped in Rs 329.45 crore ($44.9 million) into the company. The message seemed to be, ‘Go and get the rest’. Nestaway set out to do exactly that. Double down, execute, grow, and start taking more and more of the pie. No hurry. No tension.

That’s changing though.

For starters, Nestaway is taking time to break into other lucrative markets such as Delhi and Mumbai. Their expenses are going up, and profitability isn’t in sight. It probably won’t be for a while. There are reports that Nestaway’s investors are taking a hands-on approach. Then the big one. Seeing the scope of scale in the shared rentals space, Oyo, which raised nearly $1 billion from Softbank in September, is stepping up to the plate, with its investment into a vertical called Oyo Living. There is a large need for affordable housing in Indian cities and the shared living model is something other players are betting on as well. Could the entry of a well-capitalised company in this space upset Nestaway’s plans?

“I am really not too concerned,” insists Sahu.

He’s still smiling

Nestaway and its pot of golden porcelain
Sahu calls Nestaway the Kotak Mahindra Bank for property owners. He’s used it as a shorthand for a company which moved nimbly, focused on the right areas and kneecapped the larger, better-funded incumbents. The bank analogy doesn’t stop there.

“Imagine we are a bank,” he says. “You are a homeowner. You come deposit your house with me. ‘Please start renting, manage all the headache. Deposit the rent at the end of the month in my account.’” Right from finding the tenant, furnishing the home, if required, depositing the rent payments in the owner’s account; Nestaway does everything.

It then goes further. It adds services. Some of which are quite creative. This includes providing insurance to the house owner against damage. Or provide for arbitration services. Or against tenant squatting. Or other hassles. If there’s a problem, a Nestaway executive is just a call away.

This is what makes Nestaway an attractive option for house owners.

All these services have a very important effect – they bring down the security deposit that tenants ordinarily need to pay. Nestaway started its operations in Bengaluru, the city which still constitutes 50% of the homes on its platform, and where homeowners usually charge around 10 months of the monthly rent as security deposit.

 

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