A country of 1.2 Billion people, an emerging economic power driven by IT/ITES/Manufacturing, > 50% of the population under 35 age band, rapid urbanization with goals set to cross 50% by 2020, the new government’s drive to establish 100+ smart cities and 6 big metros offering Real Estate investment opportunities. This is the nutshell of the potential of Indian Real estate space.
India’s housing demand stands at 10 MM home seekers at any given point in time. While this could be a very juicy indicator, there lies an equally glimmer part to it. That the measure called QTS – Quarter to Sell, used for measuring the velocity of new units in the market. The QTS for some of the big metros such as Del/NCR, Mumbai or Bangalore stands at 8! Yes, it currently takes almost 8 quarters to sell out all the un-sold inventory of each of these markets.
Some combo Macro-Micro dimension of Indian Realty space are as follows:
If Residential Real Estate (leaving out other commercial, industrial, etc.,) is pegged at 5% of the country’s GDP, which is ~ $30 Billion, then on an average the amount of money spent by developers for marketing their projects stand at 8% of total project’s outlay. Giving us total marketing spend of $ 2.4 Billion, in INR terms we are talking of a INR 16320 crores of total market potential for all intermediaries in the distribution value chain.
Now following are the stats w.r.t. to key players in the distribution space and their respective stand:
Online market place companies such as Commonfloor.com, Housing.com, etc., trace their origination to 2007 when the 1st set of players in Magicbricks & 99 acres set up portals to list properties from the supply side and property discovery based on preferences from demand side.
Large brokerage firms such as Square Yards etc. are largely across all key geographies and operate with large scale in-house sales FOS plus empaneled independent brokers on sub-brokerage basis.
Independent brokerage firms are the next set of participants in the value chain. They are numerous, usually focusing on their respective micro markets, largely unorganized and offer 1 – 1 advisory services to select set of clients that they have in their portfolio
The 1st category of players – online market place, these are currently into a consolidation mode with too many players and too much money having followed but very little traction w.r.t to topline & bottom line story to back that up. The overall industry turnover is a meagre INR 150 – 200 Crores vis-à-vis the $ 2.4 Billion opportunity space overall.
The primary reason for this is, these platforms cater to just one stage of the value chain, i.e., Discovery. With growing adoption of Internet among the target market, these platforms come handy for search, research and discovery requirements of the primary realty market.
The major highlight of this category is tech enabled features such as virtual reality, 3 D visual effect, 360 Degree walk through, etc., giving an end user a near perfect experience of checking out projects & individual units. However, there ends the value add, as given the complexity/nuances of property buying, the decision making & final transaction still happens largely offline, a reason for this space not scaling up to the full potential.
The biggest player in this segment is 99 Acres (Info Edge (I) Ltd) claiming of hitting Rs.100 Crores of revenue mark – Source: Techcircle.vccircle.com
The Category 2, the large brokerage firms, are around for >= 5 years now and have made some headway in terms of establishing distribution network across key markets and in-house infrastructure such as telesales, FOS, marketing departments, effectively tapping the large property seekers base.
They also empower small brokerage firms by giving them resources & tools to market exclusive projects and in return reward them with attractive commissions on the completed transactions.
Despite the aforementioned traction, these is still a large gap in terms of meeting the supply with available demand.
Square Yards is one of the prominent player in this segment, having achieved Rs.100 Crores of Revenue in < 24 months of operation & Rs.100 Crores to Rs.200 crores milestone in < 6 month timeline. The greatest advantage of Square Yards lies in the distribution network of 22 cities/9 countries/950 FOS, the structured deals they offer to their customers, robust backend tech/marketing/call center infrastructure and peripheral offerings such as Square Capital (Home Loans)/Square Connect (Sub-brokerage)/Bling (Events based promotional platform)/Scapes Works (3 d capability arm)/etc.,
The category 3, small Brokerage firms, are largely local players operating under a skeletal set-up and holding few clients in their portfolio. The biggest value add these agents offer to the overall value chain is their “relationship factor”. Real Estate industry is strewn with unprofessional and unethical practices and in such a condition anyone who offers professional services to his customers would naturally command superior customer loyalty and trust.
However, these kind of professional setup are few and far in a landscape that’s otherwise littered with trust related issues. Also yet another big drag on this category is the lack of knowledge to use new age marketing techniques to get more customers and often limited in scope of catering to projects located in a micro market. Hence on their own, achieving scale that can create a dent for the industry is not to be expected.
To summarize, against the mammoth demand & excellent econometric scene, still a long way to go w.r.t. scale & innovation on the distribution of primary realty space.
