Realty drought no bar for Private equity's thirst for startups
Oct 24, 2015
Source : ET

 

BENGALURU | MUMBAI: Private equity and venture funds' appetite for India's real estate portals and related startups has not waned despite sales in the sector winding down, industry data shows. The segment has attracted nearly $250 million, or over Rs 1,600 crore, in investments in the last 18 months mainly from Helion Ventures, Nexus Venture Partners, SoftBank Group, Accel India, Horizen Ventures, Qualcomm Ventures and Nirvana Ventures. 

Their eagerness to invest indicates their confidence in the role of intermediaries in pushing sales and inventories in the realty sector. Some of the key investments during this period were into ventures like Housing.com, CommonFloor.com and PropTiger.com. 

According to data from Venture Intelligence, Housing.com raised $113 million in 2014. This was followed by $37 million in Proptiger Realty, $40 million in CommonFloor and $10 million in Grabhouse by a clutch of investors. 

"Investors are still looking for leader in this segment. They are seeing three things before investing in online platforms -the team that runs the business, customers' pain points that are being addressed, and lastly , the addressable market size," said Amit Kumar Agarwal, CEO and co-founder of NoBroker. The portal adds about 30,000 listings every month and boast of 15% conversion. It raised $3 million in early 2015 from SAIF Partners. 

Indiaproperty Raises $50 m

Chennai-headquartered real estate portal Indiaproperty.com is raising about $50 million to fund its expansion plans. Ganesh Vasudevan, its CEO, said the online real estate market is still at a nascent stage and offers higher return to builders on their marketing budget as compared to the conventional media. 

"Online real estate platform has become very attractive to investors as they see it as a sweet-spot in this segment. Marketing spends are now moving from offline to online as this is still untapped and fragmented," said Vasudevan, whose company has raised $19 million in two rounds from JP Morgan, Mayfield and Bertelsmann. "Existing investors will also participate in this round of funding," said Vasudevan. 

Square Yards focusing on growth 

The portal receives around 2.5 million unique visitors every month. 

While these portals have continued to attract investments, the few that have scored profitability and managed growth are turning out to be more appealing for investors. 

"Square Yards is focusing on growth and targeting over 1,000 transactions a month by December while being EBIDTA positive. We are also experiencing very active investor interest for our next round of institutional funding," said Tanuj Shori, CEO of Square Yards. 

The startup raised $6 million in April from a clutch of high net-worth individuals, while it achieved operating level profitability within 22 months of inception by adopting a differentiated strategy of selling primary real estate rather than offering a listing platform for primary and secondary market property transactions. 

Developers need these intermediaries or any sales partner particularly in the current scenario and that justifies investors' interest in such startups. Players like Godrej and Tata Value Homes and Brigade Group have tied up with online platforms to sell homes. 

India's real estate sector has been witnessing weakness in sales momentum, rising inventory and debt levels for the past three years. 

Unsold Housing Stock Rises 18% 

As per the latest data, unsold housing stock across top eight property markets in the country rose 18% to over 1.1 billion sq ft as on June 30. Barring Hyderabad, all other cities showed a rise in unsold inventory, with Bengaluru showing maximum increase of 55% from a year ago. Although the growth in unsold stock in the National Capital Region has been just 7%, the region tops the chart with 326 million sq ft, followed by Mumbai Metropolitan Region at 201 million sq ft. 
 

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