Rising spend on renovations propel growth for home decor start-ups

Those still with jobs are saving on commute, eating out and holidays. Some of this 'extra money' is going towards home renovation, with WFH being the new normal

One of the less talked about outcomes of the Covid-19 pandemic is people ending up with more disposable incomes. Those who still have jobs are getting to save more, as expenses on commute, eating out and holidays have come down. Some of this extra earning is going towards home renovation and repairs, especially since home is now the de-facto office.

After a slump in the early Covid months, business at LivSpace and HomeLane, two leading home decor internet start-ups in India, have bounced backed, according to industry executives and reports. People, especially in the metro regions like Mumbai, Delhi and Bengaluru, are using the stay-at-home time to renovate homes, leading to a surge in this nascent sector.

Tabled below are the results of a consumer survey of 900-plus respondents in the process of buying/building/renovating a home before Covid-19

When are you likely to continue with your home construction / renovation/ home buying plans?

.	Renovation	Home Construction	Buying a new house
This year	71%	66%	50%
Defer to next year or cancel	29%	34%	50%

Source: McKinsey & Company India Home Construction Consumer Survey Apr 2020

Currently, LivSpace and HomeLane, both started in 2014, dominate the space followed by new entrant Design Café. The start-ups offer end-to-end décor and renovation services for homes and kitchens, in a format where most of the design consultation happen online.

However, a closer look at financials reveal that HomeLane fared better than LivSpace. FY20 figure for LivSpace show that its net loss went up by 154 per cent to Rs 370 crore, even as the top line rose a staggering 419 per cent to Rs 417 crore. 

In comparison, HomeLane’s losses in FY20 were 85 per cent higher at Rs 102 crore and revenue by 135 per cent at Rs 232 crore. LivSpace did not immediately respond to a request for comment. HomeLane declined to comment.

Table: FY20 financial figures of LivSpace and HomeLane

LivSpace	FY20	YoY Change	HomeLane	FY20	YoY Change
Revenue	Rs 417 cr	419%	Revenue	Rs 232 cr	135%
Expenditure	Rs 767 cr	240%	Expenditure	Rs 326 cr	110%
Net Income	Rs -370 cr	154%	Net Income	Rs -102 cr	85%

Source: ROC, others

To be sure, LivSpace is sizably bigger than HomeLane. It has raised about $200 million in venture funding to date, while HomeLane’s kitty stands at about $54 million. Even though it operates in eight cities, less than HomeLane’s ten, LivSpace is known to have higher ticket price for projects. It is also the only firm with oversees operations in Singapore.
 

However, a closer look at the financials reveal that HomeLane fared better than LivSpace. The FY20 figures for LivSpace, obtained from sources, show that its net loss went up by 154 per cent to Rs 370 crore, even as the top line rose a staggering 419 per cent to Rs 417 crore. 

According to reports, the market of interior design in India is about $18-20 billion. About a million new homes are bought every year and a total of 1.8 million homes come up for renovation. The average project size is estimated to be Rs 5,00,00 project.

Before the Covid hit, the financial year ending March 2020 was a high-growth period for the two firms and the segment as a whole. The two grew massively leading to further investor-interest. In August, HomeLane raised a bridge round of $8 million, in the run-up to a larger series D round. LivSpace raised a series D round of $90 millon in September, while Design Cafe bagged $3.6 million in June.

However, owing to Covid disruption LivSpace pared its workforce in May when the company let go off 450 staff or 15 per cent of its workforce.

With Indian having more disposable income to spend, the money has trickled down to home renovations market. That has also caught the eye on investors. LivSpace is backed by marquee investors TPG Capital, Goldman Sachs, and Singapore’s Kharis Capita, including strategics like Ikea. HomeLane has Accel, Sequoia, RB Investments.

“Renovation may see the quickest recovery in demand on account of specific repair needs that cannot be delayed, smaller transaction value, WFH triggered upgrades and lower impact of supply side factors” noted the report McKinsey & Company India Home Construction Consumer Survey Apr 2020.

“Home constructions may follow given most consumers planning to construct a house have already purchased the home and will only incur cost of construction.”