If the investment trends in the post-covid world are any indication, real estate technology (or proptech) is quickly becoming its own category in the startup world. New VC firms globally have raised hundreds of millions of dollars to invest in real estate tech.
Recent analyses, including a comprehensive report by ANAROCK, highlight a vibrant funding environment wherein 36% of Startup-India recognized Proptechs have successfully attracted investments. According to a report by Housing.com, the cumulative proptech investments in India exceeded the $4 billion mark between 2009 and 2022, boasting a remarkable compounded annual growth rate (CAGR) of 49 per cent.
Source: Venture Intelligence, Housing.com Research
Nevertheless, akin to other industries, Indian startups encounter unique challenges deeply ingrained in cultural and operational intricacies. While the global B2C Prop-tech startups are using AI, VR, and blockchain to elevate customer experiences, their Indian counterparts are still contending with teething issues. The Indian real estate industry, historically resistant to technology, stands as one of the final frontiers where technology has yet to comprehensively permeate the entire value chain.
It is interesting to note that despite the challenges related to the construction side of real estate, there is a strong underlying intent towards tech adoption on the customer side. This presents significant potential for upcoming B2C startups. A range of opportunities exist for startups to enhance an average home buyer’s experience, from the initial research stage when a customer is exploring options to the post-purchase phase after becoming a homeowner.
According to a report by property consultant ANAROCK, as of 2021, about 45-50% of real estate transactions in major Indian cities were being conducted through digital platforms. This includes property searches, virtual tours, online booking, and digital payment processes. While the initial push for virtual tours came during the pandemic, home buyers continue to enjoy the enhanced customer experience of immersive VR tours for the initial discovery stages of property purchase. The technology allowed potential buyers and renters to explore properties remotely, offering a 360-degree view and an immersive experience. During the pandemic, when physical property visits were limited, VR tours saw a significant uptick in usage, allowing the real estate market to continue functioning effectively. This innovation not only enhanced the consumer experience but also expanded the market reach for sellers and realtors. As per a report by KPMG, the virtual reality market in India is expected to reach $1.6 billion by 2025.
The shift towards digital solutions continues post property occupation. The proof is in the numbers. Livspace, a multi-disciplinary interior design and architectural firm, claimed to have achieved a top-line growth of 85% across the business, with revenue reaching nearly Rs 1,100 crore by the end of FY 2023. It is noteworthy that the startup achieved unicorn status in 2022.
Beyond property listing and interiors, there are other areas where customers have started to embrace technology. For instance, Mygate, which is getting used in over 3.5 million homes across 25,000 societies for improving security within apartment complexes and managing societies, is a testament to growing adoption of tech by the consumers in managing their housing properties. Another area which is gaining traction amongst consumers is fractional ownership. Startups such as Strata, Hbits and Alt DRX, are redefining this space by helping consumers acquire a small fraction of professionally managed properties. According to Knight Frank, the market size of fractional ownership properties in India- growing at an annualized rate of 10.5% – is expected to expand by 65%, from $5.4 billion in 2020 to $8.9 billion in 2025.The key will be for founders to identify these pain points and solve them with the help of technology.
India stands among the top 10 global housing markets experiencing notable price appreciation. With an annual growth rate of 10.5%, the residential sector in India has surpassed more mature markets like China, which recorded a 9.6% increase. Factors such as the nuclearization of families, time constraints, and rapid urbanization are poised to further drive the adoption of technology among Indian consumers. This presents a favorable opportunity for PropTech firms to address customer challenges in the B2C landscape. The trend is reflected in the numbers; among the three unicorn PropTech startups – NoBroker, Livspace, and ofBusiness – two operate in the B2C domain.
For entrepreneurs and investors considering the Indian Proptech scene, the current momentum signals an opportune moment to act. The combination of emerging consumer willingness and the uncharted market landscape offers a canvas ripe for innovation and growth.
