PropTech attracts $551 mn investment in India in 2020: Report

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March 09, 2021 2:39 PM

Investments in the PropTech segment grew marginally up to $551 million in 2020 from $549 million in 2019.

Prime residential property is defined as the most desirable and most expensive property in a given location, generally defined as the top 5 per cent of each market by value.

As more and 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 in 2020, surpassing the aggregate of previous year – $549 million, shows a report by Housing.com.

The report titled ‘PropTech: The Future of Real Estate in India’ shows that investments in the PropTech segment grew marginally up to $551 million in 2020 from $549 million in 2019. However, even the marginal upwards movement could be termed as significant, considering the unprecedented challenges the world faced during 2020. More importantly, investments in the segment during the year were at their peak in 2020 since tech-based start-up companies in India began entering the real estate segment in India, starting 2000s.

So far, $2.4 billion have been invested in India’s PropTech industry across 225 deals as on date, the report says.

The report attributes the growth in the segment to a fast-growing middle class, rapid urbanisation, the adoption of technology, an increasing internet user base of over 500 million users, 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 with fewer efforts as applied traditionally. If these platforms were only popular to find and finalize properties in the pre-pandemic era, the pandemic has changed much of that. It is also pertinent to mention here that housing markets in India would have taken an even more severe hit because of the virus outbreak and its effects, had the PropTech industry not been gradually growing in the country,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & PropTiger.com.

“While pointing out that growth of the industry in the Asian region has yet to reach a level seen in their western counterparts, the report also points out that online business platforms that have been on the radar of investors since 2009, have evolved since, from being mere mediums for digital classifieds to offering full-stack solutions towards discovery, advisory and transactional support, with this and ever evolving technology, the new decade belongs to PropTech,” added Agarwala.

The segment is likely to see a tremendous boost in the near future amid growing use of technologies such as virtual reality, drones, big data, artificial intelligence in home purchases. This is expressed through the fact that real estate in the country is slated to become a $1-trillion market by 2030.

The report, however, also points out a majority of businesses are still conducted through the offline mode in the property brokerage business in India, estimated to be a $1,400-million ($1.4 billion) industry. However, the growth of PropTech in India is also indicated through the fact that even with the actual transaction culminating offline, over 50% of the real estate buying decisions take place through online searches, the report says. With the growing internet user base that is expected to increase up to one billion by 2025, the opportunity for players in this segment is colossal, it adds.

Despite global headwinds, private markets continue investment momentum in PropTech firms in India

After crossing the $500-million mark in 2018— $530 million worth of deals were signed in that year—deal volume in the PropTech segment further increased to $551 million in 2020, says the report. Despite the severe challenges in the year 2020, deal value in this tremendously growing sector crossed the $550-million mark, surpassing the aggregate of $549 million invested in 2019.

The investment inflow in real estate is growing at a CAGR of 10%, of which PropTech has been a blue-chip segment since 2010, growing at a robust CAGR of 57%.

Segments attracting Investors attention

Because of its earning potential, 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% in 2020, as compared to 25% in 2015. This is primarily because of the rent-yielding assets such as offices, warehouses, malls, etc. 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.

In contrast, the share of the residential segment has been reduced to a mere 2% in 2020, as compared to 61% in 2015. Several factors have played their part in the waning of investor interest in the residential segment. Sluggish demand, steep capital values, construction delays, coupled with the NBFC debacle, have kept investors away from the residential segment.

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