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A competitor analysis of the Indian real estate online market
GROUP 3 - PGPEX8
March 2015
Submitted by :
Anirban Sengupta (7/8)
Hitesh Kumar Sakkerwal (16/8)
Mohit Singhal (24/8)
Rishi Shrivastava (38/8)
Sourav Gopal Jha (44/8)
Online portals work on the principle of aggregator model where people can find, look,
compare and book the properties from different real estate players (Amrapali, Marvel,
Supertech , etc.). Online portal has come into existence from traditional brick and mortar
model and same model replicated into online world. Online portal industry provides the
same features of “purchasing funnel” model where buyers can create their own sets
(awareness set, consideration set, preference set and purchase) based on the number of
attributes. Desperate to boost housing sales that have flagged as India's economy stuttered in
recent years, property developers are tying up with portals to push transactions online with special
promotions.
Business model of online real estate portal market works in similar way as traditional
model but additional features such as – Analytics, Trends, periodic news etc. allow users
to be more familiar with the complete purchase process as compared to traditional brick
and mortar model. Following is the business model for the online real estate portal market
in India:
Before analysing the current state of online real estate portal industry, it is crucial to
analyse that how these portal impacts market. This analysis will also provide the
reasoning why online real estate portal industry came into existence.
To aggregate buyers/sellers and provide real time communication between
them
The primary reason for online portals to
come into existence was to provide the
same platform to buyers/sellers and to
initiate the real time communication
between them. As we have learned that,
multiple layers in any industry increases
transaction costs so same is applicable for
real estate as well. Traditionally in brick
and mortar model, people used to buy the
property through multiple layers (one for
searching, one for finalising the deal, one
for completing the legal formalities , etc.).
Online portals have overcome these
barriers and provided a way where transaction costs can be reduced and buying process
can be completed through the single platform.
To bring transparency/convenience to people while searching for
properties in same or different cities
Another reason for online portals to come into existence was related to bring the
transparency in the buying process. Online portals provide the convenience and
transparency at the same time, thus chances of conversions are high. Online portals
provide the following benefits to people:
Wide choice of listing — (Convenience)
Better Information – More information/images/videos (Convenience)
Easy to compare/shortlist properties (Convenience)
Visible buyers/sellers adding to comfort (Convenience)
Market Trends/prices/legal matters (Transparency)
Connects – chats, webinars, telephone numbers (Transparency)
{
Buying behaviour of people is changing rapidly and now Legal
people are looking for value added services through same
Financial
service. Because traditional model didn’t provide such kind of
services under single platform, therefore online portals found a Renovation
blind spot for the same and came into existence.
Home
Current state of online real estate portal industry: Ancillary
The online real estate portal market is currently in disruption phase and focusing on the
following things as part of disruption process:
Expansion to tier-2 and 3 cities and because of that lot of workforce has added in
last 2-3 years
Currently portal market is focusing on product improvement and user experience
Enhancing security features as buyers or sellers don’t want to see fake listing or posts
Future State1:
Most of the battle in online real estate portal industry will be based on the consumers’
acquisition, revenue growth, marketing and analytics. Although consolidation has not
been started yet in this industry as industry is still in introductory phase but in near future
most of the players in the industry will look for the consolidation to eliminate other
players. Also foreign investors such as Google ventures, Murdoch , etc., have pumped
more than $200 millions into Indian online portals which can be seen as promising factor
for the industry growth. The next 2-3 years will be very crucial for this industry in terms
of scalability, acceptance by users, security and sharing. This industry can see following in
near future:
Significant jump in scale of buyers/sellers expected — 40% revenue will come from
mobile
Tier 2 - Tier 3 markets expected to have around 25% share in total revenue
Content platform expected to become stronger and wider
1 • http://in.reuters.com/article/2015/01/12/india-realestate-internet-idINKBN0KL06C20150112
INDUSTRY COMPETITIVE ANALYSIS REPORT !6
Porter’s Five Forces on the Real Estate Industry
In this section, we’ll analyse online real estate industry using Porter’s five forces
analysis. Here, we’ll consider various forces in industry and how they affect the players in
industry.
Following is the analysis of the industry on each of the factors mentioned in the figure
above.
The company raised another $19M in venture funding, led by Helion Venture
Partners, in April 2014. Softbank has led a $90 million investment in housing.com along
with Falconedge and other investors in December 2014.Housing.com closed two
undisclosed rounds of funding in February and March 2013. The rounds were led by
Network18 CEO, Haresh Chawla, and Zishaan Hayath, the co-founder of Chaupaati
Bazaar.
Product
housing.com lists properties submitted by users, either brokers or owners, on an
interactive map. Search results are filtered by available rooms, lifestyle ratings, child
friendliness index (CFI), and area-based pricing.
In December 2013, the company launched a new option for users to search for paying
guest rentals (PGs) in cities.In February 2014 the company introduced a feature called
Housing New Projects, which showcases 3D models of buildings superimposed on Google
maps. The feature incorporates interactive aerial views and floor plans of upcoming
project sites.
The company has mapped approximately 150,000 houses in India.With the Agent
Map, users can contact real estate agents using four different search types: general, sub
locality, building, and landmark.
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Website Mobile Application
In terms of costs incurred , 99acres would be primarily on advertisements and its sales.
The sources of revenue generation are its paid subscriptions , listings, advertisements and
sale and rental of properties.
99Acres reported a loss before tax of about Rs 10 crore in Q2 FY15.The CFO of Info
Edge, commented
“The high teens growth rate in revenues of the core recruitment business in Q3 is in line with the
previous quarters of the financial year and it reflects consistency, stability and inherent strength of
our business. As a part of our stated strategy we have stepped up our investment in 99acres for a
long term value creation in this vertical. However, as a result the overall operating EBITDA has
declined by about 6 crores. This trend of higher investments in the operating expenses of 99acres is
likely to continue for the coming quarters.”
Thus, there is a clear inclination towards future growth of 99acres owing to
competition from newer players like commonfloor.com and housing.com. Most of the
spending is understandably on the digital platform although they did invest in TV
2 http://blog.timesinternet.in/setting-the-record-straight-on-online-real-esate/
INDUSTRY COMPETITIVE ANALYSIS REPORT !17
advertisements as well. Their marketing strategy does not involve too many print ads.
Majority of the traffic is directed through Google Keywords (a tool provided by Google to
maximise revenues and footprints).
A quick SWOT for 99acres is presented below:
Strength
Weakness
First Mover Advantage
Focused on Internet Market
Genuine base of clients and brokers
Incumbency Factor
Opportunities
Threats
Brick and Mortar Real Estate
Impending housing bubble
Resale Market
Growing Competition
On expected lines, Info Edge announced its decision to invest Rs. 7.5bn in
99acres.com. Although it still has a majority of the market, there have been constant
efforts by 99acres to differentiate itself from its competitors like launching a new
verification listings on its website. The long term strategy for the company is to become
the single largest player in the market. It hopes to follow the Australia (REA group) and
UK (Rightmove) model.
But India, necessarily might not be the ideal market to implement the same logic ,
mainly because-
In the numbers game, India presents a tougher challenge than the above mentioned
countries.
Variety and options is something that an India consumer likes to have. Therefore
even if 99acres goes ahead and gains market share, there is no guarantee that it will
play out in their favour.
Another reason which could be a reason of concern is how 99acres sees its
competition ahead. In a recent statement by Hitesh Oberoi, CEO of Info Edge-
“While 99 Acres doesn’t appear to have been affected in terms of traffic share, they’ve seen the gap
between 99Acres and its nearest competitor (MagicBricks) increase because the newer players are eating
into the number two players’ market-share.”