The incomplete Indian real estate start-up story

If one has to assess the Indian start-up landscape on a mad-max metric of publicity generated per unit of capital invested in the last few years, the uncontested winner will be the real estate start-ups of India, largely owed to a nasty display of spat between a popular CEO of a real estate start-up and the investors. With a caveat, though. The publicity generated was way more than what could be ascribed to the infighting of some yet-to-be-made real estate tycoons fighting over yet-to-be-found piece of land. The quick rise of a new breed of real estate listing platforms starting with the famed Housing.com and later copied by a host of incumbents and clones alike was one of the most significant shifts in the way Indian real estate data is presented to prospective tenants and buyers. Though they were still light years away from any semblance of puncturing the shields of the middlemen operating in the market, but suddenly a new tone has been set to satisfy the demand for transparent and relevant data. As things stand today, almost every top property portal have cloned each other and stabilized into a uniform pattern. Though they do carry out the odd marginal innovation in their bid to increase revenue in an otherwise competitive zero-sum market.

All of the above is history and rhetoric now. What is relevant is what have we built so far and what is the next likely battle tank that the Real Estate start-ups are bound to build. We will take a quick tour down the memory lane to set the context here.

Going back to the early 2000s, just after the recovery from the wild dot-com era, the first major wave of internet boom in the country was opening up a floodgate of new digital media opportunities for every sector including real estate. The eyeballs of the customers were being dazzled by a frantic array of real estate websites and portals being built. Vertical listings, directory listings, p2p listings, meta search engines, you name it and you had it. Replicating every possible print format to the web, eager to list every possible property for their visitors. A house being the single most important purchase of an individual in a lifetime, or even in the case of tenancy, a high-value transaction locked typically for a year, finding the right product is an extremely sensitive and painstaking process for any individual. To reciprocate to this sensitive need of the customer, the builders and brokers deploy considerable amount of resources and energy to woo their customers. Expectedly, the builder and brokers are rarely constrained by the advertising budget, particularly so in the Indian real estate market where supernormal profits is a natural requirement, given the little highlighted builder-politician-mafia nexus. Be it production of the right marketing material, brochures, videos, pictures, guided tours, special launch events, gobbling up the most expensive advertisement space on various media channels or appointing the pin-striped salesman, the real estate players are ever ready to throw in the extra moolah to snatch away the customer. Naturally so, within a short span of time these portals were saturated by the brokers and builders to gain the valuable mind space of the potential customer. The market saw a radical shift in the dynamics wherein the customer gradually broke out of the dependencies of personal contacts, newspaper cuttings, yellow page browsing, broker referrals and word of mouth feedback. The brokers and builders were happy to have found for the first time a more direct access to display their capabilities to the customers. Welcome to RE 1.0 — the first generation of real estate portals of India.

The RE 1.0 kept evolving organically throughout the first decade of 2000 culminating in the emergence of portals like Magicbricks, 99acres, Sulekha, Propertyguru among others as some of the prominent players providing a massive listing of properties.

But something was amiss! In spite of the heavy throughput, the customer was still using these websites for hardly more than just shortlisting of phone numbers of brokers, hardly getting any insight into the property as such. Enter 2012! A new kid on the block called Housing.com started by a bunch of fresh grads led by a firebrand CEO was to usher in a new era in the digital real estate listing space of India. Though more or less a direct clone of the listing models from the American counterparts called Zillow/Trulia/Redfin, this staart-up wholeheartedly embraced the adage of “data is the new oil” and started providing an exemplary set of information on the properties, complete with pictures, locality details, distances, maps, nearby hospitals, schools, public transport and a lot more for the customer to get an in-depth perspective on what she might eventually be renting or buying. The customer was suddenly empowered to make a much finer shortlisting of properties, brokers and builders right from her desk. All of this when backed up by a strong technology team in place, venture capital money poured in, and soon the portal was the poster boy of a much-awaited freshness to bloom the digital advertising space of real estate. As a testimony to their innovation, several clones emerged and incumbents themselves ramped up their teams to mimic and remold to this new reality of customer empowerment and data transparency. The frantic activity post-2012 reshaped the digital advertising landscape of real estate and the sellers were quick to follow suit like always. So much so that most builders and brokers now spend anywhere between 25 to 75% of their advertising budget on digital channels.

Peppered by a spate of acquisitions, mergers and consolidation, reminiscent of some of the investor dynamics of the industry, today we have a relatively stabilized offering. A bunch of start-ups with a battery of slick apps, mobile responsive websites, progressive web apps and a well thought out UI/UX. These platforms provide a thorough overview of the property and locality, with a list of amenities, prices, square footage, nearby hospitals, schools, public commutation etc. Though minor kinks like fake and outdated listings, still remain to be sorted out, but the template is well set. Besides the well-known names of 99acres, proptiger, commonfloor, housing, nobroker etc. newer clones are cropping up every now and then with equally powerful offerings. But the winner so far is far from decided. That was RE 2.0.

So in the race to be a winner in the strongly network-effected nature of the business, the investors and entrepreneurs are ever contemplating what should be the next big offering. Will it be the futuristic virtual reality and augmented tours with an online transaction experience which is still 3–4 years out, or there is still room to for something slicker, more concrete within the ongoing framework of the existing technologies?

To get the answer lets look at what the new age Indian customer is looking for and what is she getting. The customer who really cares about a swimming pool as an amenities listed on these platforms, is also likely to be concerned about the size and operating hours of the swimming pool. A customer who takes note of gym is also more than likely to be curious about the size, operating hours and specific instruments in the gym. The one who values socializing in the neighborhood is likelier to be more convinced by checking the picture, size, furniture, fixture and facilities available in the clubhouse. A slow moving lift with a capacity of 3 people for a 50 apartment complex can be a big put off for many. The ones concerned about electricity bill certainly would like to know the direction of the house and provision for solar water heating systems. For many, a bathroom is defined by the brand of the fixtures, type of tiling and flooring rather than the square footage. People want a clearer picture of what firefighting systems are in place. And a lot more.

Further, in the case of buying of a new property, there is this entire set of over 40 different permissions from a host of different state and civic authorities which are often used as a tool for delay of project completion by builders. A potential buyer can certainly be spooked or wooed by a peek into the relative status of these permissions.

In addition to the above, one data, that every buyer or tenant will kill to get, is the going prices of recent comparable transactions of the property of interest, where the only recourse she has is hearsay and the word of the builders and brokers. This is the Achilles’ heel of the real estate transaction market and a perennial source of dissatisfaction, where a lot of time is spent for something which otherwise should have been available freely. Interestingly with the frantic pace of land and property record computerization across India, it’s becoming easier than ever to access virtually any property transactions data. In fact, the state of Maharashtra has put up its entire property transactions records online, though the cumbersome navigation on some of these government websites are an example in themselves.

In short, there is a goldmine of data out there which is just not yet available in the RE 2.0 platforms. Most of the information being provided gives a high-level overview of the property, but do not significantly affect the decision or choices. Moreover, each one of the details outlined above is purely static in nature, easily obtainable from the listing providers and is usually provided when the customer physically visits the site. The customer is looking for much more than a commoditized depiction of real estate property in its current form. There are significant opportunities up for grab which will be the major determinants of the winning companies in the next couple of years. This will, of course, require a lot more thinking on the implementation details to create a competitive pressure on brokers and builders to provide the data, fitting all that data in a lucid and palatable manner onto the small mobile screen, verifying the authenticity of the information among others. The incumbents are sitting on quicksand in a still nascent market, only to be wiped off fast by the next generation of start-ups, unless they up their own game. The market will force the evolution of the digital real estate ecosystem to mutate into RE 3.0 providing an extremely thorough and comprehensive micro view of the individual properties and the experience around it to the users, way more advanced than the current ones, but though still short of the utopian goal of a VR augmented discovery to transaction on the web. Till then, the prudent investor and entrepreneur looking for their bounty hunt will be on their toes.