From Stopgap to Lifestyle: How India’s Rental Economy Is Rewriting the Rules of Ownership
For decades, renting in India was seen as a compromise: temporary, transactional, and aspirationally inferior to ownership. That stigma is fading fast. Today, India’s rental economy is no longer a fallback. It is becoming a deliberate lifestyle choice, reshaping how urban Indians consume, live, and move. And the numbers finally back up the narrative.
The clearest signal comes from Rentomojo. In FY25, the furniture-rental platform reported ₹266 crore in revenue, a 38% year-on-year jump. Profits surged 92%, with net profit nearly doubling to ₹43 crore. With 2.2 lakh subscribers across 65 stores in 22 cities, the company is now preparing for an IPO in FY27, an inflection point that underscores the sector’s shift from experiment to institution.
The scale of the shift
India’s rental economy was valued at $20.31 billion in 2024 and is projected to reach $26.78 billion by 2030, growing at a steady 4.56% CAGR. At the same time, gross rental yields improved to 5% in Q4 2025, up from 4.84% just two quarters earlier.
What’s driving the change is structural, and not cyclical. Factors such as rising homeownership costs, urban job mobility--especially among millennials--smaller households, return of corporate renting, and a growing acceptance that flexibility often beats permanence are driving engines of the rental economy.
Rental performance varies sharply across cities. Delhi leads with an average 5.81% yield, with South Delhi’s compact homes touching nearly 9.6%. Kolkata follows closely at 5.79%. Bengaluru averages 5.09%, though West Bengaluru climbs to 6.8%. Pune’s Hadapsar records yields above 7% for one-bedroom homes.
Mumbai remains the outlier. Despite soaring rents, yields hover at just 3.15%, as property prices have far outpaced rental growth—highlighting how affordability, not demand, is now the binding constraint.
Rental inflation cools, preferences change
After years of runaway increases, rental inflation is easing. In the first half of 2025, rent hikes across six major metros moderated to 7–9%, down sharply from the 12–24% annual spikes seen between 2021 and 2024.
Demand is also shifting. Tenants are downsizing. Demand for 1BHK homes surged—up 27% in Navi Mumbai, 23% in Gurugram, and 19% in Pune—while 3BHK demand fell sharply in Delhi and Gurugram. 2BHKs remain dominant, accounting for 46% of overall demand, while semi-furnished homes lead preferences with a 52% share.
The message is clear: renters want efficiency, not excess.
Furniture rental has emerged as the most compelling proof point. Furnishing a 1BHK can cost ₹2 lakh, often five to six times the average monthly salary. Subscription-based rental platforms solve that mismatch—offering flexibility, relocation support, and maintenance without locking consumers into ownership. Rentomojo’s profitability shows that asset-heavy rental models can scale, provided demand is predictable and subscription-led.
Technology has stripped friction out of renting. AI-driven pricing models adjust rents dynamically. Digital platforms have disintermediated brokers—43% of tenants now find homes online, up from 35%. Contactless payments, app-based bookings, and even blockchain-enabled trust mechanisms are becoming standard. Renting, once paperwork-heavy and opaque, is becoming data-led and transparent.
The challenges, and the big opportunity
Despite the momentum, constraints remain.
Regulatory inconsistency across states, the lack of a unified national rental framework, and modest net yields of 2–3% after expenses continue to test investor patience. Furniture rental, while profitable, requires heavy upfront capital during expansion.
The sector’s next phase will depend on regulatory clarity, operational discipline, and smarter capital allocation.
India’s rental economy is entering a maturity phase. Infrastructure-led demand is replacing speculative spikes. The Model Tenancy Act is slowly improving confidence. Commercial rentals—offices and retail—are delivering stronger yields than residential assets. With IPO-bound players validating the model, institutional capital is starting to pay attention.
(yMedia is the content partner for this story)