Will it make a journey from a disruptive product to disruptive business model?

[Editorial notes : The online real estate market is currently going through disruption. The newest kid in the block, Housing has already managed to build a warchest of INR 132 crores. Can they disrupt the broker business? Read this piece by Sandeep Reddy (@hsrdce) analyzing the model.]

Housing Raincoats
Housing Raincoats

A disruptive map-based product with verified inventory has definitely shaken up the market. In 2 years, 20 lac photos+ 2 lac listings + 12 cities covered + 900 staff + Rs 132 crs in funding is testimony to the fact that they are disrupting the real estate marketing space.

The current business model for almost all real estate classified websites is focused on charging the brokers and builders listing fees. However, I see that this business model can potentially be disrupted by Housing.com because it will be difficult for Housing to make money from brokers!

Brokers are not liking Housing.com. Why?

Owner/Landlord postings % increasing and broker postings decreasing. This is making the broker uncomfortable. Remember when Housing started, almost all postings were broker postings and today Housing.com is chasing owners to list their properties. This change in strategy may work well from a user perspective but definitely not from a broker perspective, who would feel that his business is coming under threat.

house broker rates

Markets like Chennai have negligible broker postings! My bet is owner postings are only going to increase in other cities as well..

 – Product making the listings more transparent and diluting the power of broker.

Additionally, getting a share of the broker’s wallet is highly competitive because of presence of many players- 99acres, magicbricks, commonfloor, makaan, indiaproperty, sulekha, quikr, olx!

Lets see Why brokers are needed in the first place in the ecosystem?

– They shortlist options as per the requirement for the seeker and reduce the hassle for the owner in terms of dealing with multiple people

– They show you the options (site visits/ home tours)- biggest value add according to me!

– They help in negotiating the deal

– They help in doing the paper work/registration of agreements

Now for this service, the broker charges 1 month of rent or 2% of the value of the deal in sale transactions. Most people feel this fee is higher-than-the-value a broker delivers.

Hence I believe that a service that can be potentially disruptive is a one that can deliver the same services of a broker and charge much lesser!

Imagine a business model where Brokerage-as-a- Service is replaced by Logistics-as-a-Service!

Basically I mean replacing a “success-fee” based Brokerage as a service model by a “fixed-fee” based Logistics as a service.

This Logistics as a service model would entail the following

– Show options

– Schedule site visits and actually have people to show the sites

– Tool to negotiate- Bid/Ask or keep it between the buyer and the seller

– Standard services for registration of agreements

Imagine Housing.com now and me looking for a 2 BHK in Thane –

Housing.com already showing me options in Thane:

– They already have a Call center, which can be used to fix site visits <time slot management- which can be built online as well>

– They already have Field staff , which would get to know of the clients who have to be assisted for site visits.

This way the model converts a transaction into a logistics play.

Revenue model ??

Rs 5,000/- for a month to avail these services for both the seller and the buyer, which is far lesser than the existing brokerage payouts!

If in 3 months, you don’t have a deal then provide a 3-month free service.

Lets see if Housing.com is successful in ramping up the broker listing fees or would they take the risk of building a completely new and disruptive business model.

What are your thoughts?

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