Real Estate+E-commerce=Winning Formula – Business Line – 2-Dec-2014

December 4, 2014 - Uncategorized

When Japan’s richest man and Chairman of SoftBank, Masayoshi Son, invested $100 million in a two-year-old property portal Housing.com, he had flagged the growing interest among investors in online real estate firms. Rupert Murdoch’s NewsCorp, picking up a 25 per cent stake in another portal PropTiger.com, also underscored the appeal.

Consumer behaviour

Advisory firms maintain that the online real estate segment has witnessed a two-fold increase in the number of deals in 2014, as compared to 2013. The value of the deals has also increased from $19 million in 2013 to $232 million in 2014.

It’s changing consumer behaviour has brought about the sudden increase in investor sentiment, and not any spurt in demand for housing and commercial properties. Users are no longer merely interested in searching for houses online, they are also buying houses.

Better revenues

Earlier, sites such as 99acres.com and magicbricks.com only provided an online platform for brokers to list their properties, but did not allow consumers to complete a transaction. New entrants such asGrabhouse.com, commonfloor.com and housing.com among others, are offering more than that. The second model has ensured better revenues.

Sumit Jain, founder of Commonfloor.com said, “The growth in the internet base and positive economic sentiment in the country, as well as the bullish sentiment of investors across the globe has helped us. Since it is technology that finds the right property, the traction in this segment is high.”

The Bangalore-based start-up, which got over $30 million this year, said it is not focusing on profits at the moment, but is generating healthy revenues. “The target is to grow the market and be profitable in the next two years,” Jain added.

Along with the organised sector, even small builders have become active online. Experts maintain that portals tend to give smaller builders unmatched visibility and reach in the most cost effective manner, which no other media can provide.

“The online property portal segment is bound to grow very well in the days to come with growing internet penetration in the country. For sellers, the portals are creating unmatched visibility, while for buyers it is ease of use,” said Rahul Jalan, Director Indiaonline.in, an online information system.

Online property portals also tend to have an edge over offline realty brokers, since they can leverage technology to sell properties to a larger audience and ensure faster conversions. For dealers and agents, it is a more locality-driven business.

Moreover, the huge brokerage fees or commissions, which are a prerequisite for offline players, do not come into play in online deals. Brokers normally tend to charge commissions ranging from 1-2 percent, both from the seller and the buyer.

Portals also have the added advantage of catering to just one segment of the real estate market, making their offerings more specialised like Grabhouse.com, a one-year-old start-up. Working on a recommendation basis, a consumer can find a house on an urgent basis by paying a fixed nominal fee of ₹999, which also includes the rental agreement fee.

Charged from both owners and seekers, the conversion rate is high, since consumers tend to opt for this model and not go to a broker, who normally would charge one month of the rental amount from both parties.

The Hindu Business Line

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