Housing (1)

As part of our #Outlook16 series, we spoke to online property listings companies – CommonFloor, 99Acres, IndiaProperty and MagicBricks about the key takeaways in 2015 and what 2016 holds for the sector. Answers have been edited for brevity.

What were the top developments in the online real estate segment in 2015? How has the sector changed from 2014 to 2015?

Vikas Malpani, CommonFloor

Consumer expectations from online real estate sector has increased way more in terms of quality, experience and better servicing than ever before. They have started realizing that with attractive deals and packages, they also need improved service and overall experience. 

Narasimha Jayakumar, 99Acres

The real estate sector moved to the online space almost a decade ago. However, it’s only last 12-18 months that this space has evolved into a major channel for buying/ selling/ renting real estate. Many developers took the online route through innovative models of pricing and even buyers followed the trend. 2015 also saw homes not only getting shortlisted but getting sold on property portals in greater numbers than ever before. 

Ganesh Vasudevan, IndiaProperty

One of the major transformations in 2015 was a significant increase in usage of mobile for property search. The mobile web experiences have become as important as those with App, perhaps even more so to the user. Overall market dynamics strongly indicate a hybrid online-offline solution stack to cater to the end to end purchase cycle. 

Sudhir Pai, MagicBricks

– The competitive landscape of the industry changed significantly over 2015. We saw intense competition towards the end of 2014 and upto mid 2015. Thereafter, the competitive activity has waned with the smaller players in the market, including those who couldn’t make much headway, starting to consolidate.

– 2015 also witnessed fast paced innovation and product development. From high quality immersive walkthroughs, to online home buying, to improvements in search, the consumer proposition has improved significantly in this year.

What were the biggest challenges for the sector in 2015?

Vikas Malpani, CommonFloor

The real estate sector in 2015 was marred by various challenges which broadly include:

– Despite high pent-up demand for housing, the prospective buyers preferred a ‘wait and watch’ approach this year. The ‘real’ consumers were hoping for some price correction while the builders, on their part, were not seen to be relenting much to this demand.

– The real estate sector was marred with various legal issues due to the slow approval process by the government. For instance, the NGT order to ban development within 10 km radius of Okhla Bird Sanctuary in Noida was not much appreciated by the realty experts.

– With few developers getting cash-strapped, the realty sector was reeling with inordinate construction delays. However, the situation was seen to be improving in the second half of 2015 with the government easing norms in FDI in construction. 

Narasimha Jayakumar, 99Acres

Narasimha Jayakumar

Narasimha Jayakumar, 99Acres

The real estate sector across all major cities grappled with rising unsold inventory. Noida and Greater Noida in Delhi NCR alone hold inventory which would take around five to six years to be completely sold at the current rate of absorption. Other cities such as Mumbai, Bangalore and Chennai too narrated a similar story throughout the year. Unrealistic prices, especially in Mumbai, were another big challenge for the realty sector. Home buyers held up their property investments waiting for price correction. Inordinate delays in both real estate and infrastructure projects also dampened investor sentiments.

Ganesh Vasudevan, IndiaProperty

The Indian economy is still in its recovery mode.

– The single biggest challenge faced in 2015 by builders is the huge pile of unsold inventory. All major metros have anywhere between 2 to 5 years worth of unsold inventory. RBI’s continuous interest cuts are not pump priming home purchases enough.

– Newly launched projects received a lukewarm reception from property buyers. Many builders have changed their product by offering smaller units to the consumers. They are also adding deals to sweeten the pot.

– Cash flow issues, and price stagnation are some of the other bigger challenges of 2015.

Even though the Real Estate Bill got approved by the Union Cabinet, the sector is still seeking transparency and it continues to be one of the corrupt industries in India.

Sudhir Pai, MagicBricks

Overcoming effects on a sluggish real estate market has been a challenge. The other was dealing with irrational competition.

What were the trends that surprised you in 2015?

Vikas Malpani, CommonFloor

Reducing Apartment Sizes: Interestingly while NCR city boundaries were expanding, apartment sizes were shrinking significantly. But interestingly, while the unit sizes are shrinking by the day, not much impact can be seen on the prices.

– Ignited interest in Tier 2 cities: Newly launch supply has increased considerably in prominent tier II cities such as Varanasi, Allahabad, Zirakpur, Chandigarh, Mohali, Guwahati, Nashik, to name a few. This could be attributed to uncertainties looming over the smart cities road-map and the fact that realty market in those cities will take time to pick -up. 

 – 40% Millennials prefer to rent:  40% millennials prefer to rent a house in the present scenario. Despite having an aspirational value attached to property buying in India, the percentage of people preferring to rent is not far behind especially in Bangalore, Pune and MMR.

Narasimha Jayakumar, 99Acres

The fact that buyers actually came out and purchased properties via the online medium was very surprising and encouraging. Given that real estate is a very high-ticket purchase and in the current environment of uncertainty when home buyers are being very cautious in their property investments, trusting the online platform came across as a big and welcome step.  

 

Sudhir Pai, MagicBricks

The mobile web seems to have held its own vs the onslaught of apps. And from an industry perspective, it was interesting to see that despite a slowing down of transactions, there was no slowdown in demand/search activity on the site. There remains strong latent demand for real estate, with affordability/sentiment playing spoilsport in the interim period.

What were your key learnings in 2015?

Vikas Malpani, CommonFloor

One of the most important learning was how technology and data can bridge the gap in organizing the real estate industry to enable fulfilling all property related decisions of consumers. We have significantly invested in innovation and product development in 2015 to address the core issues faced by customers while buying/selling a property. 

Currently, we are following a marketplace model so revenue is not our focus at the moment. We are investing heavily in building features, technological innovation which will eventually make money.

Narasimha Jayakumar, 99Acres

While the real estate portals experimented with exclusive builder tie-ups and flash sales to garner traffic share, the users really looked for robust product offering and genuine information on the platform. Neat user interface also added to the overall experience.

Ganesh Vasudevan, IndiaProperty

Some of the key learnings in 2015 include

– What worked on desktop need not work on mobile and less is more for mobile search. One should first invest in a best in class mobile web experience before starting to push app downloads.

– A hybrid online-offline solution stack is the ideal mix for marketing properties in India and consumer needs more time before evolving to adopt online property booking.

– Rather than focusing on giving fancy features (eg. map search experience), realty portals should focus on simplicity in discovery (search experience) as that’s what consumers want.

Sudhir Pai, MagicBricks

We’ve figured that discipline, staying focused on consumer needs, and strong execution around what really matters is more important than irrational exuberance on the marketing or product front. We’ve consciously stayed away from shiny new toys which are less impactful on solving genuine consumer needs at scale.

What are some of the broad trends that you expect to see in the sector in 2016?

Vikas Malpani, CommonFloor

Vikas Malpani

Vikas Malpani, CommonFloor 

The broad trends that we expect to see in 2016 are:

– High Demand for ready-to-move-in properties: Inordinate construction delays have led to high demand for ready-to-move-in properties. This trend garnered huge traction in 2015 and, strikingly, is still making headlines. This was also reflected in our recent survey titled ‘Consumer Outlook Survey: H 1 2016’ with maximum respondents voting for ready-to-move-in within one year as the most preferred construction stage for investment across major metros. This also indicates the ignited interest of end-users in the realty market.

– Realty Looks promising in 2016: Infrastructure development, spurt in office space demand by IT/ITeS sectors and realistic property values have kept the momentum steady in 2015. More so, new markets have emerged that are likely to continue experiencing substantial real estate activity in 2016.

– Surge in NRI investment – Indian property developers are anticipating a 35% surge in enquiries from NRI-based purchasers as compared to last year (about 18%), reveals the Associated Chamber of Commerce and Industry of India’s (ASSOCHAM) latest study.

The online real estate market in India is poised for tremendous growth. A recent study by Google points out that 53% of real estate transactions are influenced by the Internet today.

Narasimha Jayakumar, 99Acres

By the second half of 2015, developers across the country realized that buyers were wary of investing in under-construction projects due to inordinate delays in construction schedules. They started focusing on completing existing projects rather than launching new ones. This trend is expected to continue and 2016 may see more project deliveries than 2015. Moreover, the markets are expected to either stagnate or witness further drop as developers would make desperate attempts to offload the existing inventory by offering heavy discounts and freebies. Increased focus on affordable housing may lead to healthy supply in this category. Moreover, banks are also expected to pass on the benefits of the reduced repo rates to buyers in 2016.

Sudhir Pai, MagicBricks

We’re hoping to see a recovery in real estate activity sometime during 2016.  And we’re expecting to see several launches of depth products which build consumption and drive usage amongst consumers and the industry.

What categories and sub-categories of real estate are likely to drive the growth of the online property listing sector in 2016? Why?

Vikas Malpani, CommonFloor 

‘Affordability’ is a key factor which will likely drive real estate in 2016 as well. All major metros saw decent launches in this segment in 2015 and the trend is likely to continue in the coming year as well. 

Other than this, with government easing norms in FDI in construction the commercial Grade A office space is likely to drive the realty sector in 2016. 

Narasimha Jayakumar, 99Acres

In the residential segment, affordable and mid-income housing, ranging up to Rs 60 lakh is anticipated to do well. Healthy demand has been noted for this segment in almost all cities and hence, experts expect faster absorption of these units. The commercial market is also expected to reap healthy capital and rental returns. Relaxation in FDI norms and opening up of routes for Private Equity (PE) and Real Estate Investment Trusts (REITs) have made it easier to do business in India. This is expected to propel investments and demand for office spaces from MNCs, especially IT/ITeS sector. 

Ganesh Vasudevan, IndiaProperty

Ganesh Vasudevan

Ganesh Vasudevan, IndiaProperty

Property prices in cities are unaffordable and most of the city suburbs have gained a bad reputation due to poor infrastructure and delayed projects. This would increase the demand for secondary and resale homes in city areas.  

Sudhir Pai, Magic Bricks

At one end, the market for luxury homes has held up and should continue to see good traction. At the other end, if there is good quality supply, the affordable housing segment should also see strong traction as this segment has a lot of pent-up demand. Real estate is very local, so performance of this sector will remain city-specific. In the short term, we expect to see more traction around flash sales, deals, auctions etc.

What was the split for traffic for mobile and web in 2015? Additionally, what is the split for traffic for mobile app and mobile web during the year?

Vikas Malpani, CommonFloor

Split is increasingly biased towards mobile. The sector itself is yet to cross over being a mobile dominating sector as the buying journey is lot more serious and strong intention driven rather than being spontaneous. App has been growing faster though mobile web remains the major contributor. 

Narasimha Jayakumar, 99Acres

Last 12-18 months have really seen an increase in the % of mobile users contributing to the overall visitors on the site. Now almost 40-45% traffic comes from mobile devices on average daily while on weekends, mobile devices contribute to over 50% of traffic. This number stood at 30% and 40% respectively about 18 months back. Among mobile users, most prefer using an app (more than 80% of mobile device users) to search for real estate primarily due to user friendly interface and product features like push messages and shortlisting of properties that makes the overall search experience enriching.

Sudhir Pai, MagicBricks

Mobile now commands upwards of 40% traffic share. Mobile Web is big for us and contributes in excess of half of our mobile traffic.

What were the demographics of people using real estate websites in 2015? How has it changed since 2014 and what do you expect in 2016?

Vikas Malpani, CommonFloor

Increasingly we are seeing more young people entering property search market. The average age of users searching property is going down. Though our core market remains between 25 to 45 years of age.

Narasimha Jayakumar, 99Acres

It hasn’t really changed much in last 2-3 years with males still dominating the decision making process of buying the property. The average trend has been males over 30 years of age with an annual household income of more than Rs 10 Lakhs. With advent of technology and availability of information online, the buyers have become tech savvy. Thus it’s probably harder to sell now, let alone the price factor. We don’t see the picture changing much in short term.

Ganesh Vasudevan, IndiaProperty

The 25 – 34 age group is always the dominant age group when it comes to property search and constitutes close to 50% of the overall visits.

In 2015, we saw property buyers falling in the age group of 35 – 44 years showing an increased interest in real estate compared to other age groups. This segment in the past has always known to be risk-averse. This is a positive sign for the market and indicates that realty sector is moving away from just speculations and would be driven by demand from end-users in 2016.

The Male – Female split is usually 60% – 40% in terms of visits. We also saw an increase in proportion of women visiting the site in the first 2 quarters of 2015 – 16. Though this levelled out in the 3rd Quarter, we expect increased participation of women in property purchase decisions in 2016.

What trends did you notice in the challenges related to hiring of people (such as availability of talent, tenure of people, willingness to move, people accepting employment but not turning up, expectations of salaries etc.) in 2015? How were they different from 2014? How do you expect things to change in 2016?

Vikas Malpani, CommonFloor

– We noticed that people were more inclined towards the media hype created around a brand rather than their role.
– Hyper competitiveness for good talent lead to ballooning of compensation packages.
– Sense of loyalty is diminishing, people do not join start-up for the start-up experience but for the wrong reasons.

Sudhir Pai, Magic Bricks

Sudhir Pai

Sudhir Pai, MagicBricks

Good quality talent continues to be scarce. While things seem to have improved a bit towards the end of 2015, we expect that high quality talent will remain harder to get and will require more senior management outreach to acquire such talent. What is encouraging though, is that risk-appetite of candidates is much higher now, and there is not just willingness, but strong desire to take up positions which carry innovation/concept risk but have a strong upside associated with them.

What challenges need to be addressed in 2016? And how can they be addressed?

Narasimha Jayakumar, 99Acres

The foremost challenge is to offload the existing inventory. This can be done by lowering the property prices to realistic levels. It is also necessary to reduce the cost of home loans which can happen only if banks pass on the actual benefits of reduced repo rate cuts to borrowers. Effective implementation of infrastructure projects and policies such as REITS and Real Estate Regulatory Bill are also required to give a thrust to the real estate sector.

Ganesh Vasudevan, IndiaProperty

The biggest challenge is to continue to remain ahead of the innovation curve especially in mobile. Online real estate mobile apps need a stronger, more compelling reason to be used. It needs to go beyond search and discovery, to add value to the decision making.

Some of the other challenges include – delivering technology solutions to make Property selling easier for builders, solving for greater transparency in information via means of ratings, neutral 3rd party review etc.

Sudhir Pai, MagicBricks

We think we will be in a position to meaningfully solve the data quality issues that have plagued our industry over the course of this year. Early 2016, we will offer products to industry which could address the current logjam in the real estate market, and hopefully re-ignite transactions. We will also need to enhance existing products, and launch new services, that enable portals to leap-frog from being listing discovery platforms to being a platform which actually help a consumer across his entire home buying cycle.

Image Source: Tim RT under CC BY ND 2.0