As more homebuyers in India plan and execute their property purchases through virtual platforms in the aftermath of the coronavirus pandemic, the PropTech industry in India attracted over $551 million investment in 2020, surpassing the aggregate $549 million clocked in the previous year, a report by Housing.com has said.
The report titled PropTech: The Future of Real Estate in India, by the Elara Group-owned online real estate advisory portal shows the marginal growth in investments in 2020 over 2019.
So far, $2.4 billion have been invested in India's PropTech industry across 225 deals as on date, as per the report.
The report attributes the growth in the segment to the fast-growing middle class, rapid urbanisation, adoption of technology, increasing internet user base of over 500 million, a young demographic base and a gradually consolidating real estate canvas.
“During the lockdown and the subsequent phased opening of the economy, most buyers concluded their property purchases using virtual mediums. That was made possible because, since 2010, enterprises have already been investing heavily in the PropTech segment to enable buyers to conclude property purchases. It is also pertinent to mention that housing markets in India would have taken a severe hit due to the pandemic had it not been for the PropTech industry’s growth in the country,” says Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & PropTiger.com
The segment is likely to witness growth in the near future amid the growing use of technologies such as virtual reality, drones, big data, artificial intelligence in home purchases. Also, the real estate sector in the country is slated to become a $1-trillion market by 2030.
The report also points out that a major part of the brokerage business is still conducted through the offline mode and is estimated to be $1,400-million. Also, even though actual transactions culminate offline, over 50 percent of the real estate buying decisions take place through online searches, the report says.
After crossing the $500-million mark in 2018 as many as $530 million worth of deals were signed in that year. The deal volume in the PropTech segment further increased to $551 million in 2020, says the report.
Despite challenges in the year 2020, deal value in this sector crossed the $550-million mark, surpassing the aggregate of $549 million invested in 2019.
The investment inflow in real estate is growing at CAGR 10 percent, of which proptech has been a bluechip segment since 2010, growing at a robust 57 percent CAGR.
The commercial residential space continued to claim a lion’s share in the overall investment in 2020. The share of investments in the segment has significantly increased to 62 percent in 2020, as compared to 25 percent in 2015 due to rent-yielding assets such as offices, warehouses, malls. The availability of an exit option in the form of real estate investment trusts also helps commercial realty remain the most preferred among global investors, the report said.
In contrast, the share of the residential segment has been reduced to a mere 2 percent in 2020 compared to 61 percent in 2015. This is due to sluggish demand, steep capital values, construction delays, coupled with the NBFC debacle, the report said.
Although private equity investments in the shared economy take up a major pie at 48 percent compared to sales and marketing (18 percent), its average deal size is significantly lower than the latter. In 2020, the average deal size in the sales and marketing segment had grown to $70 million compared to $33 million in the shared economy during the same period, the report said.
According to the report, online marketing is also emerging as a clear winner when compared to the traditional methods of branding with benefits such as targeted marketing, increased brand awareness, and continued engagement. The outreach is also much higher with online methods since there are over 504 million real-time internet users in India as against the 425 million newspapers subscribers.
The report also points out that virtual property purchases are becoming popular in the country amid growing number of smartphone users in India in the aftermath of the coronavirus pandemic.
In a pan-India survey, 37 percent of respondents said they were willing to close the deal completely online after one site visit. As many as 47 percent of respondents say they will be open to doing so after multiple site visits. As against the national average, nearly 50 percent respondents in Mumbai and Chennai are open to buying/renting entirely online or just after one site visit as compared.
In the online survey, which was conducted with respondents from Ahmedabad, Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, Mumbai and Pune, 60 percent of participants say they are willing to use digital platforms for exploring options to buy or rent homes.
While the respondents in the 25-35 age group are more open to closing the purchases online, respondents aged above 45 years are interested in using digital platforms to search for options and would be willing to close the deal online only after multiple site visits, the report said.
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