In its attempt to cool what are among the fastest-rising property prices in the world, China is pushing its people to rent instead of buy. That’s prompting venture capitalists to pour millions into an old-fashioned sector that’s being uprooted by technology: rental management.
Tencent Holdings, Warburg Pincus and Sequoia Capital are among the VCs betting on startups to win a slice of the market expected to grow to 4.2 trillion yuan (USD 664 billion) by 2030, according to estimates from Orient Securities. That’s almost half of total home sales in 2017.
The initiative to encourage renting homes is creating opportunity for half a dozen companies, including Ziroom, You+ and Mofang Apartment. With already about 1.2 million tenants using Ziroom alone across nine cities in China, the startups are becoming the new gate keepers of social credit: tapping data and technology to determine rent prices, screen tenants and generate uncannily detailed profiles of their hobbies and habits.
"China’s urbanization, along with a younger generations’ demand for better quality of life and control of property prices, has sent the rental sector into high-speed growth," said Liu Xing, a partner at Sequoia Capital China, which invested in Ziroom. "The new winners in this space will be those who can provide high quality professional service by applying big data and technology."
Ziroom raised 4 billion yuan led by Warburg Pincus, Sequoia and Tencent in January. You+’s backers include DST and Shunwei Capital Partners, the VC firm backed by Xiaomi’s founder Lei Jun. Warburg Pincus, which has invested about USD 8 billion in Chinese companies, has invested in three startups in the field, according to Julian Cheng, co-head of Warburg Pincus China.
China has 190 million workers who rent, according to research from real estate agency Lianjia. That’s 77.6 percent of people who live away from their homes. China’s largest developers, including Country Garden Holdings, have announced plans to make millions of new rental properties available.
Unlike Airbnb or Tujia.com -- known more as purveyors of vacation rentals -- these new startups are focusing on long-term leases, such as one-year duration.
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