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Cracking the real estate market code

Source : BUSINESS_STANDARD
Last Updated: Sun, Jul 28, 2013 20:14 hrs
​Real estate

"We're in search of rock star coders, hackers, data scientists and designers." No, this is not a job post for an information technology company but a hiring pitch on the website of a year-old real estate portal. What does a property listing portal (there are at least half a dozen around) need a data scientist for? Perhaps, the answer lies in what the 12 co-founders of Housing.co.in - all in their early 20s and techies from Indian Institute of Technology-Bombay - set out to do in March last year. The brief: Minimise the need for physical presence in a consumer's search for a home.


Before they started the venture from their hostel room, none of the co-founders had any experience in the realty sector. In about a year, the start-up has grown from a single-city (Mumbai) player to one present across seven cities - Mumbai, Hyderabad, Pune, Gurgaon, Bangalore, Noida and Ghaziabad. Plans are afoot to enter the Delhi, Chennai and Kolkata markets in the coming months.

What has caught the attention of consumers and investors alike is the company's clutter-free location-based search for homes, derived from number-crunching algorithms, physical collection of data by an in-house team and data analysis. This month, the portal reported 35,000 unique visitors a day, against 7,500 in January. A clutch of investors have pumped in Rs 17-odd crore into the venture in the past 12 months.

Breakthrough
It all started when a bunch of final semester students at IIT-Bombay began house hunting for their post-college stay. After about a month of rigorous search that included trolling property portals, dealing with multiple brokers, physical checking of locations and hard-nosed negotiations with landlords, they found one to their liking. "That's when we decided to do something about it," says Advitiya Sharma, one of the co-founders. After three months of intense research, they came out with algorithms to replicate a map-based service that could trace the physical locality in and around the house. "The idea was to enable a consumer to review a property without being there physically," says Sharma.

As the idea caught traction, the strength of the founder group swelled to a dozen within a month. The co-founders raised about Rs 2 lakh in seed funds to begin the venture in June 2012.

Modus operandi
A team visits each property site uploaded on the portal, photographs the interior and exterior of the house. They collect data points on the amenities, connectivity, neighbourhood and the location, including distances from the nearest bus stop, airport, schools, and hospital. This process is followed in the case of each listing by a broker or a landlord. While assessing a property, consumers can filter out or add features to the search. A price-heat map shows how property rates have moved in the particular locality through the years.

Each broker's profile and contact details are available against every listed property. It also has a broker rating, based on customer feedback. For six-12 month packages, brokers pay Rs 5,000-10,000 for unlimited listings. Listed properties no longer available for rent or re-sale are regularly weeded out.

Clutter-breaker
During the first nine months, the firm focused on mapping the Mumbai market, tweaking and fine-tuning search-based features. "Data and design are our foundation pillars," says Sharma. The user-oriented navigation features and the location-based approach helped differentiate it from other real estate portals. The listing-based model means brokers and landlords pay for the service (currently, it is free), while it's free for consumers looking to rent or buy a property. Marketing new property projects is a separate revenue channel likely to be launched soon.

After publicly unveiling the portal in June 2012, the first few weeks were spent pursuing a brokerage-based business model - earning a fee for the sale of each property. "There were too many variables in that model," says Sharma. The listing-based model was a tried and tested one; other property portals, including sector leaders such as 99acres.com and magicbricks.com, also followed this. "We quickly decided to switch plans," Sharma adds.

In time, each co-founder has taken on a specific role within the organisation. For instance, while Sharma is the chief marketing officer, as Chief Executive Officer, Rahul Yadav manages administration and recruitment. Abhimanyu Dhamija heads the data science lab and the technology team, crunching alogorithm-related data. Between January and July this year, when it expanded its footprint to six cities, the start-up's headcount rose from 80 to 300.

Sharma and his team are not forthcoming about the company's revenue, citing investor confidentiality clauses. The portal recorded operational break-even in the Mumbai market in nine months. Then, it started scouting for investors to scale up and enter other cities. In February, entrepreneur, angel investor and an IIT alumnus, Zishaan Hayath, along with six others, chipped in with an investment of around Rs 50 lakh. "This team knows how to build a tech product," says Hayath. This was followed by a dinner pitch in March to media industry veteran Haresh Chawla, former group chief executive of TV18. A convinced Chawla not only decided to fund the venture but also come on board as a mentor.

"The market opportunity is massive and underserved. None of the incumbents are solving the real problem - allowing a consumer to find a house that fits his or her need," says Chawla. The clutter in other sites gives Housing.co.in a ready-made market-defining opportunity, he adds.

As the ramp-up in operations gathered steam, venture capital fund Nexus Venture Partner pumped in $2.5million (about Rs 14 crore) in the start-up in June. Investors say a cumulative fund corpus of Rs 17-odd crore through a 12-month period should be sufficient to meet expansion plans for the next two years. Apart from entering other cities and consolidating operations, the immediate plan is to expand the data science lab, says Dhamija. "We want to have a 100-people facility," he says. Currently, he heads a 30-people team of IIT pass-outs. The founding team is quick to acknowledge its data analytics prowess is a key differentiator and a major competitive advantage.

Warning bells
So far, it has been a roller coaster ride for the company's founding team. "The pace of growth has been mind-blowing," concedes Dhamija. But this dizzy feeling might not last for long, as Housing.co.in emerges from a start-up mode and starts building a company for national-level play. A key investor concedes, "It may take them up to two years to match the scale and size of operations of market leaders such as 99acres or magicbricks." Adds a senior executive from a rival real estate portal: "The challenge will be to build an organisation with a sustainable business model. While expanding, marketing and distribution could be other challenges." So far, Housing.co.in hasn't accepted ads on its portal to avoid compromising user-experience. But this comes at a cost - letting go of a potential revenue stream.

Several new-age realty portals targeting niche market segments such as students and working women are at the incubation stage. As other players in the market catch up with user experience features, the challenge for this bunch of "IITpreneurs" would be to stay a few steps ahead of competition.

MAPPING HOMES AND CLASSIFIEDS
Co-founders: A dozen under-25-year-old IIT-Bombay graduates
Product: Map-based realty portal for buying, selling and renting properties; gives a virtual view of each property based on search parameters set by users; a "point of interest" feature allows one to explore the neighbourhood for key social amenities
Investors: Angel investors led by Zishaan Hayath; Haresh Chawla, former group CEO, Network 18; Nexus Venture Partner
Presence: Mumbai, Hyderabad, Pune, Gurgaon, Bangalore, Noida, Ghaziabad
Employees: 300
Revenue strategy: Listing fee from brokers with six-month and annual packages; Listing fee from landlords, and brokerage from selling and marketing from new launches (Last two revenue channels yet to be activated)
Challenges: The young tech-savvy co-founders do not have previous experience of building and scaling up a business; Incumbent market leaders and new entrants can replicate some of the map-based features taking away the novelty factor; need services of experienced professionals to scale up and build a national-level business

EXPERT TAKE: Haresh Chawla

When I met Rahul Yadav, it was clear these youngsters from IIT-Bombay (my alma mater) wanted to build a world-class solution to address the house-hunting problem. I saw a brilliant and passionate bunch of youngsters who had the chutzpah to actually do it! And, they have, technology-wise, built a platform that can be benchmarked with the best globally. The business has received an incredible response from consumers, brokers and landlords and is growing at a scorching pace.

However the key challenge for any start-up is to manage this pace of growth, to make the proverbial transition from an outfit to an organisation and to build an organisation structure that fits the demands of the growing business at each stage. The core team at Housing.co.in is very energetic; now, it needs to focus on building these capabilities and processes. They have created a winning and disruptive business model, but that alone is not enough for business success.

Start-ups need to supplement entrepreneurial energy with professional rigour. Founding teams have to bring experienced people into various functional roles in the business. Founders need to make space, recruit great people and align them to the ambitions of the founding team. The toughest part of this transition is re-adjustment in the founding team's mindset on how to take a step back and integrate professional newcomers into the team.

Housing.co.in has to create a dynamic organisation structure that can handle the sudden and rapid growth from 10 people to 100 and then to a 1,000 - all in a span of 12-18 months. The founders have to bear the brunt of this change and create role-clarity for the professional team, despite shifting business priorities. Professionals need to be empowered and be allowed to take the lead in decision-making. Only then would growth not overwhelm the business.

In the last three months alone, the team has done a fantastic job of expanding into four more cities and has handled this expansion very credibly. Now, it is working towards building an organisation to support this growth. And, the real test would lie there. They have the vision, the winning-product, the capital and the passion to build this idea into a large, admirable company.

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