Chinese Internet Giants Are Targeting Housing Rental Market

4 min read 

For the vast number of migrants in China, house rental has been a hard issue. House purchase is faced with many policy constraints and the price is too high to afford the house. So for them, renting seems to be the only option available.

For the vast number of migrants in China, house rental has been a hard issue. House purchase is faced with many policy constraints and the price is too high to afford the house. So, for them, renting seems to be the only option available. But when renting houses, they may face numerous problems — bad intermediaries, one month deposit and N months’ rent paid in advance, demanding requirements from landlord… The convenience and regularization of housing leasing have become an urgent problem.

Thankfully, the Internet giants are accelerating their steps in developing the Internet as an important element in the convenient housing rental chain. At present, the Internet giants such as Ali, JD.com and even China Unionpay have landed in the residential rental market. While bringing new experiences to the public, they have their own calculation.

Internet giants target the housing rental market

Zhima Credit

In fact, Alibaba’s entry dates back to March this year. At that time, Alibaba’s Alipay was the first to launch the free deposit service in Shanghai. Its operation in past half year shows that though the house offering free deposit service only accounts for 15% of the total, it makes up 80% of the volume. There is no doubt that deposit exemption has great temptation – Zhima Credits are also proven to be useful.

After this successful test, Alibaba began to stride forward. At the launching ceremony of China Reliable Apartment Union recently, Alipay announced its launching of credit platform that user whose Zhima credit exceeds 650 can enjoy deposit exemption and monthly payment service.

In addition, JD.com also entered the real estate market, but chose the direction of real estate e-commerce. JD.com, whose business always overlaps with Alibaba, is also expected to enter the segment of housing rentals. After all, JD.com also has a Xiaobai Credit and it will definitely have this credit to play its role. In addition to the Internet giants, China Unionpay announced a partnership agreement with Shenyang Housing Administration Bureau and will jointly promote the building of house rental market.

As a result, the housing rental market has become a hot property. Driven by Ali, more giants are to join the market. A whirlwind which could be compared to O2O and sharing economy is taking shape quickly.

Set foot in new areas and penetrate more aspects of the public life

The Internet giant has a multi-faceted view of landing rental market. For one thing, the housing rental market has great potential for development. China’s rental market is expected to grow to 2.9 trillion RMB by 2025 and more than 4.6 trillion RMB by 2030, according to The Rise of Leasing Report released by the HOME LINK institute. It may be a wise move to jump into rental market when Internet field has become a Red Sea.

For another, Internet giants can also take the opportunity to have their products and big data penetrating into other aspects of public life. For example, Alipay credit system has guaranteed the housing source and has improved user’s rental experience. As a result, Internet giants can enjoy closer relationship with the public. When Internet giants have entered food, clothing and travel fields, living, a most important field, doesn’t escape from the net.

In fact, from economic and political environment, entering housing rental market is an important action for Internet giants to “occupy” offline market. The Internet giants have already tested new retail and rural markets and now, the rental market is a new battleground in the offline world.

It’s a small step and there’s more room for development

It is important to note, however, that the Internet giants only take a small step forward in the rental market and there will be more room for development in the future. For example, Alipay’s two businesses, namely lease management and rent payment, only cover eight cities include Shanghai, Beijing, Shenzhen and Chengdu.

Although Alipay Zhima credit may exempt deposit for some users, the fundamental contradiction between supply and demand has not been resolved. In addition, now Internet giants focus on the housing owned by enterprises, which belongs to the middle and high-end rental market with less deposit dispute. They haven’t fully landed at all the rental level.

Definitely, it is a good start to take this first step. In the future, with time, more mature system and improved chain, Internet giant can get more say and initiative in the rental housing market and ultimately form rental environment truly benefitting the public.

This article originally appeared in LangjingTMT and was translated by Pandaily.
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