After the Real Estate Bill was passed, there was a flurry of activity among builders. The Bill, among other riders, stipulates that the builder can’t use pre-booking money as capital for construction. The move, in principle, was to weed out “fly-by-night” developers who delayed projects and often ended up delivering shoddy constructions.
The fallout of the bill would mean real estate portals would lose out on the currency they relied on most: listings.
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This meant classified players, such as Housing, 99acres and MagicBricks, which relied on these listings would eventually not be able to populate their portals as aggressively as they did before. And with a market that has vacancy rates around the 16% mark, it means a change is needed to regain the weakening grip on the customer base.
Now, however, analysts believe that a revival in the real estate segment is on the cards. “Private equity financing in real estate improved with $3.6 billion invested in 2015, compared to $2.2 billion in 2014,” said an EY report. But if this will translate to real estate tech catching on will be a test.
Investors, however, believe that this was a change that had been coming for a while.
"There were three types of classifieds in newspapers: jobs, real estate and matrimonial,” said Ishan Singh, part of the Mumbai Angels network. He explained that while jobs and matrimonial moved online to a subscription-based model, real estate listings were free. “So, this means these listing websites now need to shift to a transaction-based platform to start making money,” he said. Broker websites solve the problem but not all the way as they, too, have very low conversion rates.
The stumbling block is that, both, listing as well as broker-based portals, have been struggling to drive traffic. Broker-based portals seem to, however, have a bigger chance of success. They rely on conversions and not just leads, which is one of the reasons Housing.com shifted primarily to a buy-sell revenue model drifting away from listing.
However, conversions mean the numbers are lower but the ticket size increases. Sources said that a lead generates
anywhere around Rs 600-800 while the commission ranges anywhere from 2%-8% of the sale (average sale in India in the developed markets is Rs 60 lakh) depending on the region.
But like Housing.com, some other top companies in the space are struggling to get get traction, sources said. But there are some who maintain that this is the only way forward.
“Squareyards made Rs 200 crore in the last year and that was because we built a strong supply chain,” said Vivek Agarwal, co-founder, Squareyards. The company had raised $6 million in July from a clutch of HNIs and is looking to raise more capital from VCs in the next three months.
Squareyards, which caters primarily to NRI customers, has set up offices in nine countries where sales agents help
customers purchase houses in India. The company primarily lists “A-grade” developers.
“Most of these customers are not very keen on location but the brand,” said Agarwal. He argued that this Bill meant branded housing projects would see a boost in popularity. This is a trend, he argued, will continue and all those who follow the hybrid: online-broker model would see success.
“We made around 600-700 transactions a month in the last six and a transaction value of Rs 350 crore per month. And we, unlike others, are now close to operationally breaking even,” added Agarwal. He predicts that the faster the others shift to the hybrid model, the faster the market starts to evolve.
