Does Santa Claus watch when you pay rent on time?

When a company claims to be the country’s first rent credit score repository, with the potential to transform the rental ecosystem, it raises many intriguing questions. Is there a white picket fence around this venture, and how has technology taken centre stage on the porch, rather than being relegated to the backyard? We turn to Sarika Shetty, Co-Founder and CEO of RentenPe, to help clear up some of these uncertainties.

What spurred this idea?

I was living on rent for quite a few years and I suddenly realized that I’m paying rent but it’s not getting recorded anywhere and I had to change a residence every 11 months or 24 months. I had to constantly prove myself to the new landlord and no records were being maintained. Or there was no repository which I could just hand over to the new landlord and show him my creditworthiness or my credibility or where I hailed from. Or provide my entire data of where I lived in the past five years, or how well my behaviour had been or the health of my rental payment hygiene etc. I felt that there was a need to establish kind of a record which could give more credibility to tenants even while they migrate from one city to the other because, in today’s generation, we see that millennials generally have graduated from B-Schools and various other institutions, then they migrate for work from smaller tier 2/3 cities. When I went for a home loan, many questions arose despite my rental discipline. They were abiding by the RBI rules and according to the rules they never considered rent as one of the financial parameters.

Now, that is exactly the point where it triggered that probably this was a kind of a problem statement that I wanted to address and then I spoke to EY and I gave this entire business idea of mine to them to ratify.

How did it translate into a venture?

I wanted them to speak to the stakeholders primarily the landlords, the tenants, the brokers, the banks, and the financial institutions to understand their take on this business. I wanted to give rent the value that it deserves because, honestly, rent was undervalued at a point in time when you were considering credit card repayments. You were considering car loan repayments, you were considering personal loan repayments. Why were not rent payments being considered - that was the primary issue. So, when EY got back to me with the extensive research, I realized that there was a big gap and this was not being addressed by anybody neither across India nor globally; this was a point where EY said that I had the first-mover advantage and I was going to build a score out of rentals.

How is it different or complementary to the concept of a credit score? What metrics are used here?

I would call it an alternate credit score which is being built out of your rental hygiene. Now while we are calculating the score there are financial parameters, there are qualitative, quantitative, and behavioural parameters that are being used in this metric to generate this score.

Tell us how the R-Card works?

Our system uses pattern recognition, AI and NLP to transform unstructured, subjective data into measurable insights. It is not a payment card. The R-Card is more of a digital ID. It gives access to better rental deals, quicker approval processes, and potential rent discounts for tenants. It gives instant access to verified tenant profiles, early rent facilities and more for landlords. RentenPe’s proprietary technology ensures that the R-Card serves this specific purpose, distinguishing it from other financial tools.

I wanted to give rent the value that it deserves because, honestly, rent was being clearly undervalued at a point in time where you were considering credit card repayments.

Any regulatory implications? How does the algorithm get the data to train on? Is privacy addressed in this process?

Yes, data privacy compliance and regulations are being followed. Our algorithm gets relevant data collected at different steps in the application. The more data and information it has, it will lead to better rent credit scores and enhance the possibility of becoming eligible for home loans and other loans

It is interesting to read about its possible ramifications for loan approvals and rent discounts - can you explain more- how will this tie into the entire ecosystem? Can this also be used for litigation scenarios?

For a landlord for the first time in residential renting, we are allowing him to apply for an early rent loan. We are disbursing loans with easy paperwork without a lot of documentation. For litigation, this is a possibility - it can happen in future as data is being built.

We have seen how vehicle data and driving behaviour are tapped for insurance calculations and processes- any such use-cases for other financial areas besides home loans?

Yes, we will see more use cases with sizable data on the app. The whole idea is that we are building a rent credit score. This rent credit score will become an alternate score which can be utilized by various financial institutions, fintech, and banks to disburse loans apart from home loans. This will get the same weightage as any other parameters like credit cards repayments or EMI payments get. For a landlord, if he wants to make an informed decision of who to rent, this score can help the landlord as he can get information which will include the tenant’s payment hygiene KYC verification status, and his permanent address proof status. Similarly, prop-tech firms are in the listing space, correct? They help a tenant find a buyer. So, tomorrow, in future, this score can help prop-tech players also- in giving more credibility and trust in the entire ecosystem. So, all these are the use cases of a rent credit score.

How tamper-proof and comfortable-with-payment-volatility would this concept be?

We abide by data integrity and security standards and regulatory compliances along with encryption layers for every payment made through the application. Payment volatility will be handled through our robust backend systems.

Can this be extended to a landlord/location scoring system too- like how we see in ride-sharing apps (with customer reviews by drivers)?

Yes, in future based on the tenant feedback and reviews there is a possibility to have a landlord scoring system in place.

What next are you planning- especially with new technology tools?

We are planning to use Blockchain in the Rental ecosystem through smart contracts.

With advanced AI we will be able to help LL &TT with quickly providing services such as background checks and rental verification etc.

What’s the equation between a Rental Score and a Credit Score?

Currently, there is no equation between a rent credit score and a credit score. I would say these are two different concepts. Credit score is something which is already in the market, it is being built out of your EMI payments, like, your credit card payments, your car loan payments, etc. Rent Credit score is a whole new vertical, which is being built out of your rental payment hygiene. EY specifies that 30 per cent of a person’s income is spent on rentals. And somebody new to credit does not have a credit score because he has never taken a loan. So, for such a person, it is so important to even build credit-worthiness out of the amount spent currently. So, I think this is the first time in India that we are recognizing that and we are building a rent score. If you ask me today, there is no equation between a rent credit score and a rental score. They are absolutely two different products.

Can taking more credit affect someone’s rental score? Or does having a good rent discipline spur more credit uptake?

There is no correlation and hence the credit rating works separately, while the rental scoring is separately working. So, it does not have any relevance between the two.

What is your overall view on the obsession to have a good credit score - does it make people lean towards taking more credit than they need/can manage? Is it good for the overall financial health lifestyle of any country’s citizens?

Yes, 100 per cent. It is very, very good. And yes, I, too, have an obsession towards building a good credit score because even our Honourable Prime Minister, Mr Narendra Modi has been conducting FinTech summits promoting the idea of financial inclusion. Honestly, let’s consider the kind of population we have and the way the uptake of loans is currently very low compared to developed countries. India is underutilized when it comes to funding or when it comes to having a good credit score for every individual. So, in India, I feel that there is a huge potential and there is an available disposable income. It is just that we need to give literacy towards building a good credit score. It is not only towards lending.

Please elaborate in the context of the overall financial health mindset.

I am saying it is a financial health lifestyle habit that one should cultivate. And especially when banks have limits and the overall country is promoting financial health, I think this becomes a very, very important tool in future where financial institutions can gauge a person’s creditworthiness even out of rentals because, currently, they do not have that data. And it is a huge pie which is going unrecognized. So, I certainly am obsessed with building a good credit score for each person even millennials who just come out of college, are new to credit, they have never had a credit score. I am saying that everybody, individually, should have a score. And their financial habits or behaviour should be recorded and they should be given that recognition.

Sarika Shetty

Co-Founder and CEO, RentenPe

By Pratima H

pratimah@cybermedia.co.in