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Venture capitalists, private equity connect with property sites


Venture capitalists, private equity connect with property sites

Last updated: April 20 2012
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  • Venture capitalists, private equity connect with property sites

    BANGALORE: Marquee venture capitalists (VCs), which have stayed away from funding real estate developers, are warming up to the digital property market. Facebook investor Accel, along with private equity (PE) firm SAIF Partners, have made a$5-million growth investment in PropTiger, an online property marketing start-up targeting first-time homebuyers.

    This follows Indian Angel Network’s $1-million equity investment in , a groupbuying portal for properties, and Helion Venture Partners pumping $12 million into e-broker India Homes. Three American venture capitalists Canaan Partners, Mayfield and Bessemer Venture Partners have jointly invested $20 million in Consim Info, which also owns online portal IndiaProperty.

    “Portals are engaging customers with technology to disrupt the property buying space. They are, right now, more of an enabler-providing tool to help homebuyers find a good deal rather than selling hard assets,” said Mohanjit Jolly, MD of VC firm Draper Fisher Jurvetson (DFJ) India.

    PropTiger, for instance, markets residential properties to first-time homebuyers offering services right from identifying properties to facilitating the cheapest home loans. The firm aided in selling properties worth Rs 1,100 crore in the first year of business, said PropTiger co-founder Kartik Varma. China’s E-House Holdings, listed on the New York Stock Exchange, is touted as an emerging markets success story in digital real estate services.

    “Online portals are exhaustive in catering to requirements based on price and location. There are roughly three million people visiting various online property portals in a given month,” said Sudhir Pai, business head at .com, which offers over four lakh property listings to a monthly traffic of 40 lakh people.

    Advertising spend on domestic the digital property market is tiny at Rs 150 crore, but rising 40% to cross Rs 1,000 crore annually in the next five years. India currently has about 120 million internet users, with roughly nine million of them being transacting customers. Internet users may reach 380 million with nearly 35 million online shoppers in the next three years, said a recent Avendus Capital report on the digital economy.

    But the digital boom has already spawned several me-too start-ups, fragmenting the online property market just as the real estate industry. Group buying sites like now search for a constantly evolving and differentiated strategy (it will soon launch 25% cash back offer) to break the clutter and sustain decent commissions – pegged between 1% an 2.5% of the purchase value.

    DFJ’s Jolly is still not a keen investor chasing digital properties. “We have looked at options, but we weren’t very comfortable with the differentiation and sustainability of the business model. We will take a hard look at it if we find one with a strong USP,” he said.

    Source: TOI
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