Making an investment decision on the RNPL model

Khaled Talhouni


May 15, 2024





A large part of our thinking on investing, beyond the quality of the founder/founding team, is broadly understanding the sector in which a company operates in, especially if it’s something relatively new or we’ve not invested in before. As we try to initiate more open engagement with entrepreneurs, our goal is to demystify the VC investing process and shed light on live examples of sectors we are actively considering investing in.

I’ll try to make these posts on an ongoing basis and starting this series by examining the Rent-Now-Pay-Later (RNPL) model in the MENA market. We met with several very impressive founders building businesses in the space which prompted some thinking on the sector as a whole. Here's a snapshot of our internal:

Business Model:


Residential markets in the GCC are uniquely structured such that landlords typically request payment in advance for residential leases and secured against post-dated cheques (PDCs). Payments are given either fully in advance or as little as quarterly in advance.

Why This Persists:

- Credit Scoring: Historically limited credit scoring of consumers, currently a developing practice, leaving landlords uncertain on tenants' ability to honour lease commitments.

- Legal/regulatory: Difficult to surmount legal hurdles in evicting defaulting/non paying tenants.

- Demographics: A predominately expat population in the UAE (over 90%) increases perceived flight risks for landlords.

- Historical Context: The GCC has traditionally been seen as a hardship post by expats, leading employers to cover and pay rent on behalf of employees in bulk in advance, which has shaped expectations in the residential real estate markets over preceding decades


A seamless, debt-like facility for tenants to borrow the entire year's rent from an RNPL provider. This allows for monthly repayments with a premium, while the provider settles the annual rent with the landlord in advance.


1) Large addressable market with over $25.8b in total residential leases est. in 2024 in the UAE alone. KSA estimate is c. $35b but with a higher growth CAGR as families move towards smaller single-family dwellings.

2) Persistence of landlords requiring advance payment in one or multiple cheques for annual rent as opposed to regular monthly payments similar to other global markets.

3) Existing consumer debt solutions for rental payments from banks/other financial institutions tend to be either very slow, cumbersome, or expensive not unlike the dynamics that allowed Buy now pay later (BNPL) to flourish for overall consumer credit.

4) Opportunity to upsell ancillary offerings for both renters and real estate owners such as property management, marketplace/discovery, home services etc.


1) RNPL models necessitate raising significant debt capital to fund renters, which could be challenging to source sustainably. Companies must navigate this while balancing the cost of capital against potential returns.

2) Gross profit/contribution margin is tight, especially when accounting for the interest on third-party debt incurred by the RNPL player. The business model's sustainability hinges on maintaining these margins at scale, posing a significant challenge.

3) With credit bureaus like Sama in KSA and Etihad in the UAE gaining traction, the foundational need for upfront rent payments may diminish. This evolution could reshape the market towards more standardized monthly rental agreements, reducing the necessity for RNPL services.

4) The model's profitability is also challenged during economic downturns. Historical trends have seen landlords offer more flexible payment options to attract tenants, such as multiple cheques spread across the year, which could undermine the RNPL value proposition.

We ended up deciding not to invest in the sector at this time and see see if the current RNPL players can:

- Raise considerable debt at preferential rates from 3rd parties debt providers to drive and scale their businesses beyond the constraints they would be able to do with a mostly equity financed balance sheet

- Build ancillary revenue streams from other services whether to the landlord or the tenants once they are embedded with either party (but especially the landlords)

We're taking a 'wait and see' approach on RNPL, balancing the risks against the possibility of a higher future entry valuation. Nevertheless, we believe this trade-off is acceptable as it allows for a clearer assessment of the sector's long-term viability based on the criteria.