Sharing Economy

Sharing Economy

Sharing is a practice known to man (and woman), from times immemorial. But today, the advent and usage of technology have resulted in the conceptualization of an economy around the concept of sharing. The Sharing Economy is propelled forward by the existence of excess capacity.

But what leads to this excess capacity in the first place? One way that excess capacity comes to exist is when supply far exceeds demand for a particular category of goods. The other way excess capacity comes into existence is via resources/assets being underutilized. For instance: in India, personally owned cars lie parked 95% of the time in people’s compounds/garages and are driven only 5% of the actual time. A company like Ola or Uber is formulated based on the excess capacity that exists in the case of cars and this has led to its resounding success.

One way of figuring out what could potentially be the next biggest trend in the sharing economy is to examine what segment of the Indian market is experiencing excess capacity. An area experiencing such excess capacity is the residential real estate sector with 11.09 million vacant urban housing units. This excess supply exists despite 95% of these empty housing units being in a reasonably ‘good and liveable state’ as per Census data. Given the amount of excess capacity present in the residential real estate market, we can expect new trends and ventures of the sharing economy to crop up here.

Add to this excess capacity, the affinity millennials have for more flexible, shorter-term arrangements and one can expect the residential rental market to experience massive growth. Within this market, the next big idea, to our estimation, could be residential timeshares. In the Indian scenario, timeshares are properties/holdings wherein multiple parties have the right to usage of the property; each at different times throughout the year. Timeshares have conventionally been attributed to hotels, resorts, and/or hospitality groups. However, given the excess capacity in the Indian residential sector and the affinity of millennials for shorter-term, more flexible, and more affordable housing; it is possible that the Indian timeshare market enters the arena of residential real estate. This could create a new model of business and concurrently a new model of living in India.

Particularly in a country like India, with a bustling population of diverse needs; there may be difficulty controlling the quality of services provided via the sharing economy in the case of peer to peer rental. This is not to say that the peer-to-peer sector will not undergo a massive rise in the Indian economy – to do so would be naive. However, a timeshare model allows for the flexibilities accorded by the peer to peer rental sector along with more ‘centralized security’ by companies that own these properties and ensure their quality control; which may be better suited to the Indian ecosystem.

Thereby, with the rise of a timeshare sector in the Indian residential real estate space, we may see a rise in what is commonly deemed “Fractional access” which emphasizes access to flexible arrangements of living for people from different backgrounds.

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