What’s NextBigWhat For Online Real Estate Space in India? Consolidation.

If max 2-3 players have to survive, who will they be? Who’s doing enough and who’s not?
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[Editorial notes : The online real estate market is currently going through disruption. Consolidation in in the making. Sandeep Reddy (@hsrdce) presents an analysis of the real estate model.]

In global news, Zillow, the largest real estate website in USA has acquired Trulia, the 2nd largest website in USA for US$3.5 bn(Source: Bloomberg).

IndiaProperty : 3D View
IndiaProperty : 3D View

Coming to India, we have currently close to 9 players vying for a market share in the online real estate classifieds market. It is extremely difficult for 9 players to survive in this ‘much smaller’ market compared to US (where the 2 largest players came together!), leaving no doubt that this space is going to see some consolidation soon- maybe in the next 12 months?

The battle will need tons of money since its going to be a battle around:

(1) Expansion to Tier-2/3 Indian cities- lot of hiring to happen

(2) Product improvement- focus on user experience, mobile app as mobile traffic increases, 3D views and similar such things

(3) Verification- customers don’t want to see fake listings and companies will have to invest in verification of listings

(4) Marketing- this will be a war and you will see them everywhere- online, print, radio and TV

(5) Data & Analytics- focus will be to build data backed marketing platform. Things like ratings, average prices in a locality, estimated prices, price trends, demand-supply heat maps will gain more prominence.

I think an evaluation of these companies on their news flow/announcements will give us a good idea on how they are gearing up for the battle. I have done some news collection for each of the companies to see any announcements that shows progress on any of the above 5 points:

1. 99acres

  • It made Rs76 cr revenues in full year 2013 and is showing good revenue growth.
  • Competition is pushing it to spend more on product (launched mobile app), verify properties, market more aggressively.
  • Announced plans to do a QIP of Rs750 crs (>US$125 mn), large portion of these proceeds to go to 99acres.
  • Loaded with this money, it looks like the only player to thrust consolidation in the space.

2. Magicbricks

A strong player till now but not much news flow except how they rank better than competition. As other players raise more money in this space, how much are they willing to invest in this business?

3. Makaan

  • Introduced a new section ‘Invest’, improved their UI but not anything major

4. Indiaproperty

  • Recently raised US$12 mn funding from Bertelsmann, Canaan and Mayfield in Dec 2013.
  • Over the past few months, they have reworked on their product a lot- which shows signs of fighting the battle!
  • They recently launched their 3D walkthrough view
  • Also launched Assisted Search to build a new revenue stream.

5. Commonfloor

  • Raised investment of US$10 mn from Tiger and Accel in Jan 2014. We all know the capability of Tiger to invest large amounts of funds.
  • Focus on apartment communities is unique to them
  • Clear product focus- augmented view, verification, mobile app
  • Spending aggressively on marketing- launched their first TV ad a couple of days back.

6. Housing

Housing Raincoats
Housing Raincoats
  • Raised US$20 mn in June 2014 from Helion, Nexus and Qualcomm.
  • Pioneers in listing verification, innovating on presenting ‘new projects’
  • However, I have concerns on how they will monetize, which will likely become an issue in the future if they are unable to solve it.
  • Hiring rumors on ET : Trip Wagoner rumored to join Housing as Chief Business Officer.

7/8/9. Sulekha / Olx / Quikr – Though they are horizontal classified sites, all these players have been strong in the real estate market. However I feel it will be tough for them to win the real estate battle given that they will not be just focusing only on this segment, unlike others.

If max 2-3 players have to survive, who will they be? Who’s doing enough and who’s not?

One thing is clear, 99acres may likely lead the consolidation- who will they buy or is it worth buying anyone?

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