Housing.com vs 99Acres.com

Housing.com 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)

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Introduction In the past decade, real estate agents continued to be a crucial component in the home buyer/rent search process. Home buyer/rent search process always happened through brick and mortar model in India and was primary source of revenue generation for many brokers in the past. With the evolution of internet era in India since last few years, this trend is now changing. People are relying heavily on online sources for search process. At the same time, people are encouraging real estate agents to be associated with online portals and providing complete information in transparent manner. This paper explores the various dimensions (industry economics, industry drivers, major market, major players etc.) of Indian online real estate portal market and future of the same.

Industry Background - Where did the industry come from ? Scale and growth of businesses such as – online retailers (Flipkart, Snapdeal, Amazon India etc.), online shopping (Jabong, Myntra etc.) is a symbol that consumers in India are comfortable in doing transactions on the internet. India’s internet login population which is already bigger than many countries’ total population and growing at annual rate of more than 20% has also opened the door in real estate market to explore the feasibility of going online. Indian home buyers have always searched for the homes with local brokers but in a vast country like India, people are not confined only to one place. As India’s young population is exploring the path of metro cities and leaving its hometown, it is very inconvenient for the people to explore the home through brokers once they reach into a different city. Internet has provided a way to look for the properties in India without leaving home and because of that, online real estate portal market has born in India. Evolution of online real estate portals in India: 70% of future employment opportunities will be created in tier-1 and tier-2 cities so greater demand of properties No single platform to satisfy all the needs of buyers Expansion of suburb areas near the metro cities INDUSTRY COMPETITIVE ANALYSIS REPORT

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Following are the few Indian online portals which are competing in the same space: housing.com magicbricks.com sulekha.com makkan.com 99acres.com indiaproperty.com 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:

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Online real estate portal industry came into existence because of following reasons (why did the industry come?): 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) INDUSTRY COMPETITIVE ANALYSIS REPORT

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Property To add new value services Search In the traditional brick and mortar model, there was not the concept Valuation of value added services while looking for the properties. 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 Ancillary Current state of online real estate portal industry: Home It is important to note that state of online real estate portal Services industry is different from traditional industry as state will depend on infrastructure provided by telecom companies in terms of bandwidth, connectivity to remote points etc. Following analysis of online real estate portal provides the current state of the industry in terms of world ranking, number of visitors, daily page view, website links etc. Some other features such as analytics, trends can provide competitive advantage to firms over others

{

Parameters World Ranking

Magic Bricks

99Acres

Housing

Commonflo or

Makaan

India property

2764

2079

5525

2726

10402

2677

231

146

513

176

779

172

22

24

20438

57

-1060

6227

881449

1100000

94981

881127

232394

785202

0.8

1.1

44.62

2.04

-11.39

66.99

402488

513779

43370

402341

106116

358540

Website back links

1451

2177

120

1495

730

914

Review (%)

79.1

68.9

76.1

77.8

74.4

77.6

234425

350379

348933

152143

3631

258258

All India Ranking Site Rank Movement Estimated traffic worth ($) %growth Daily page view

FB-Likes

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

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Lot of focus on data and analytics to solve marketing problem. Additional features such as heat map, estimated prices in near future will provide competitive advantage to players operating in the industry 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

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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.

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1. Threat of new entrants: We have decided to rate this force as “High” because we see big threats of new entrants in this industry. Based on our analysis, we have classified the potential competitors into four categories: • Firms who are not in industry but can overcome entry barriers particularly cheaply: The entry barriers in this business are low for new entrants, due to following reasons: Low initial investment Learning curve is not steep Resources (skilled employees) are present in abundance Market presents huge growth potential, seeing the increasing number of people staying away from their homes for jobs and education Increasing demands of independent brokers, which makes Online Real Estate portals attractive to house owners and tenants / buyers These low entry barriers and attractive growth opportunity makes it attractive for the new firms to enter this industry. These firms can include anyone from big conglomerates to the new emerging startups. • Firms for whom there is an obvious synergy from being in the industry: In our analysis, we have figured out certain types of firms who’ll have obvious synergy from being in the online real estate industry. These firms can include following: Online Travel Firms: This type includes firms such as Makemytrip.com and Yatra.com. These firms have lot of customers who relocate from one place to other. In the race of providing full fledged solutions; these firms can enter into online real estate industry so that their customers can find a complete solution with just one login. Online Furniture retailers: One of the most important thing that lot of people do on relocation is to purchase new furniture and curtains that suit the look and feel of their new home. Online furniture firms such as Pepperfry.com find an increasing number of such customers. By entering into Online Real Estate Industry, these firms can provide their customers with the choice of selecting furniture for their new home, and provide suggestions based on the look and feel of new house (typically provided by the owners while registering their house on sites). This facility will help furniture companies attract more customers and will help them enable their customers to furnish their house before moving in.

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• Firms for whom competing in the industry is the obvious extension to their corporate strategy: We have put firms such as OLX and eBay under this category. These two are the most used destinations for customers to sell their old items. An obvious extension is to sell real estate properties (house, lands etc) on these sites. Moving in this direction, OLX has already started offering house rental and purchasing feature on its site. Although the features are currently not as rich as those at online real estate sites such as housing.com, but it is just a matter of time before these firms will enter in this space. • Customers or Suppliers who may integrate forward or backward: In this category, we have out big real estate developers such as Kolte Patil Developers and Marvel Realtors. Currently, they offer real estate properties such as Apartments, Independent duplexes, office spaces and lands for sale. The availability of ample amount of real estate properties and low entry barriers of online real estate industry makes it attractive for them to integrate forward - either by starting their own online real estate portals or by acquiring any firm already in this business — to take one more step ahead towards customers. Also, they can move towards property rental services along with sales. As they’ll have their own properties, they will enjoy good control and credibility among customers. Keeping all these factors in mind, the team has concluded that threat of new entrants in high in this industry. 2. Threat of substitutes: The industry faces “Low” threat of substitutes. In our analysis, we have figured out substitutes such as Hotels and service apartments, which are used at substitutes by a very small section of customers. This small section primarily comprises of higher income segment and business travellers who get their stay sponsored by their organisation. We have considered very low threat from these options because they do not provide permanent / long term stay options to customers. Typically, the usage of these substitutes by customers is limited to a stay ranging from a few days to a few months. Apart from these substitutes, we could not figure out any other substitute for a house. Hence, we have characterised threat of substitutes as “Low” for online real estate industry. 3. Buyers’ Power: The industry finds an increasing of buyers / customers with increasing number of competitors who provide similar services in it. The demand of online service of rental / purchase of properties is increasing due to the emergence of INDUSTRY COMPETITIVE ANALYSIS REPORT

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trend where people stay away from their home due for job and education. Also, the increasing number of nuclear families presents a huge growth opportunity for firms in online real estate industry. This increasing number of buyer lowers their negotiating power. However, low entry barriers and attractive growth potential will induce more and more players to enter into this industry. One example is OLX, which has recently expanded its portfolio in online real estate industry. It’s just a matter of time when other firms, discussed in point 1 of this discussion, enter into this industry. This increasing number of firms in this industry increases buyer’s negotiating power. Due to these factors, we have characterised buyer’s power as “Moderate” in this industry. 4. Suppliers’ power: The suppliers in this industry are the property owners and brokers. Online real estate industry provides them the facility to reach out to a bigger chunk of potential customers across the globe. Also, this platform frees house owners from the increasing demand of brokers in monetary terms, as now house owners can directly contact the prospective tenant. This lowers the supplier’s negotiating power. However, the increasing number of players in this industry gives suppliers an option to choose from various online portals to reach out to customers. This increases their negotiating power with the firms. In order to get more deals for their customers, the firms have to get more and more suppliers on their portal by designing attractive deals for suppliers. The “Chicken – egg” phenomena will ensure more customers with more suppliers and vice versa. This increases suppliers’ negotiating power. Hence, we have characterised this force as “Moderate”. 5. Intensity of Industry Rivalry: The online real estate industry sees an increasing number of competitors, competing for an increasing number of customers. We have figured out following points which helped us determine the intensity of industry rivalry: • Attractiveness of Industry: Online real estate industry presents an attractive growth opportunity to players. With the proliferation in corporate jobs, lots of youngsters from small towns are migrating to metro cities away from their family. These jobs require people to keep changing their locations in every 3-4 years, which increases a sustainable demand of houses in big cities. Also, this corporate culture of frequent relocation keeps the demand sustainable. Additionally, with an increase in awareness related to higher education, students have to migrate from their home to other cities. An online option for finding houses for rent / purchase makes it easy for these people to relocate. Hence, this industry is currently very attractive for new players to enter, which increases the rivalry.

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• Low fixed costs: Online real estate industry requires very less amount of initial investment. This low investment lowers the entry barriers, enabling new and small players to easily enter the market, which ultimately increases the industry rivalry. • Switching costs: The switching cost for customers is negligible currently. With minimal differentiation in the kind of product, customers find it easy to hop from one site to other in search of best deal. The only way through which these costs can be raised is providing differentiating service. E.g. Housing.com provides a user friendly interface, with the capabilities to search and sort houses on the basis of price / rent, amenities, type of locality, additional facilities and closeness to major points in city. These features are currently not available in such a user friendly form at any other site. However, this differentiation is not sustainable. Hence, we have concluded that switching costs are low for customers, which increases the industry rivalry. • Information Complexity: The players in this industry need the information about real estate properties available in a particular region. They need to contact the home owners and provide exciting deals to them. This information is not very complex to get and interpret. This low complexity of information results in increased rivalry in industry. • Product Differences: The product in this industry (an online service to help people find best deals in real estate sector) has very low scope of differentiation. The only points of differentiation are the additional services provided by the firm, which are easy to imitate for competitors. Hence, the rivalry is further increased due to low product differentiation. • Brand Identity: Brand identity is the only factor that can help firm get credibility and differentiation. However, since most of the players in the industry are fairly new with very less brand equity, there is currently no differentiation in this regard. This further adds to the intensity of rivalry in the industry. Based on our analysis on above factors, we have concluded that this industry faces high intensity of rivalry.

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housing.com About the Company

A group of twelve students from the Indian Institute of Technology, Bombay founded Housing.co.in in June 2012, currently having nine founders. The company bought the domain Housing.com and the number 03-333-333-333 in September 2013 for a total of $1M. housing.com has raised four rounds of funding since it's founding in 2012. The company raised $2.5 million in Series A funding from Nexus Venture Partners in June 2013. The company used the funds to create its Data Science Lab and to expand to four cities: Bangalore, Gurgaon, Pune, Hyderabad 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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Unique Selling Proposition - Data science lab (DSL) housing.com's Data Science Lab (DSL) has generated a number of "Heat Map" algorithms and demand flux maps based on these filters.The CFI heat map shows child friendliness in a particular area and it measures neighbourhoods on three different criteria: number of schools, number of hospitals and parks, and proximity of these facilities to the area (figure on right, green means u n f r i e n d l y, r e d m e a n s friendly). The algorithms also demonstrate price variations in properties across the city. These are called price heat maps figure on the left. Every City is represented on a heat map so that the customer can zero in the locality that suits his or her demand. In the below heat map of the rental rates, red being expensive and green being inexpensive. There are a plethora of other analytics available for free on the website, like the demand supply map which lets the user know the listings available for a locations and the number of searches for the same location, shown right, giving a clear picture of locations which are in hot demand and the ones where finding an empty house will be easy.

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housing.com also provides many options to filter the choice of houses apart from the regular ‘number of rooms’, ‘budget’, ‘posted by’ and ‘locality’, like the lease type, i.e., if bachelors are allowed in a society, the furnishing the house offers and the amenities the house comes with. Zeroing in on a house using housing.com thus becomes very simple. To add to this, housing.com provides a housing lifestyle rating to each listing to enable users to choose better. It is an algorithm that quantifies the overall experience of living in a given apartment. The algorithm takes into account the most basic needs and sought after luxuries, and weighs them according to their importance. Several factors are considered while imparting individual scores to each of the four verticals. The algorithm in place uses around 50 such parameters. These ingredients then go into the recipe that churns out the Housing LifeStyle Rating – a number that stands for all those other tidbits that actually define the experience of living. The final product of the algorithm — the rating, is a number ranging between 0 and 10. housing.com also has more photographs of the listings, with all of them verified, than any other competing website, and all these features can be accessed using a single window, without leaving the main page.

Housing.com is also available as apps for Android and iOS. INDUSTRY COMPETITIVE ANALYSIS REPORT

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Apart from helping landlords fix a better rent for their houses and renters find a better home for in their budget, housing.com plans to provide end to end solutions like preparation of rental agreement wherein the renter and rented would be supposed to fill in some basic details on a predefined form, and housing.com will do all the paperwork, calculates taxes and deliver the documents at the stakeholders doorstep. Due to such great features, housing.com has become the world’s fastest growing online real estate platform.


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99acres.com About the Company

99acres is an online real estate portal owned by Info Edge (India) Ltd. The website was started in 2005 and along with Magicbricks.com, is one of the older players in the online real estate industry. The company has its headquarters in Noida, Uttar Pradesh. Info Edge also owns the popular portals Naukri.com and Jeevansaathi.com. Similar to a marketplace concept, 99acres is a forum where buyers, sellers and brokers can interact. 99acres was one of the first companies to launch their mobile application wherein users can browse, post and share property related information through mobile. 99acres has gained lots of accolades and recognition. The following awards have been conferred to the company over the years Corporate excellence award (Amity) Web portal of the year Most admired real estate website The website for 99acres and their mobile platforms are user friendly and contain a lot of information

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Website

INDUSTRY COMPETITIVE ANALYSIS REPORT

Mobile Application

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The current market share as claimed by 99acres claim that they are the market leaders in the industry with 40% market share, but that claim has been contested by magicbricks.com who claim that the parameters for deciding the market share are not standardised. Unique visitor numbers according to comscore2 are as below

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/

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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 Genuine base of clients and brokers

Focused on Internet Market Incumbency Factor

Opportunities Brick and Mortar Real Estate Resale Market

Threats Impending housing bubble 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 becauseIn 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.”

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According to Hitesh Oberoi, the focus for 99acres would be on the below Product Brand Building Data Quality Scaling Sales Teams One area where 99acres lacks behind the host of features that its competitors have launched over the current period. Housing.com launched an agent map whereas Commonfloor.com has augmented real estate listings Another problem is the high attrition in 99acres. The current strategy is to increase hiring by 20%. The concern with 99acres.com is that it’s focused on the long term strategy, primarily because the market is not growing at a rate it would ideally desire. But increasing competition from newer players can’t be ignored in the current scenario.

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