The opportunity to revolutionize real estate with the use of technology is not new. Decades ago, big change came to real estate with the democratization of information. Portals like Zillow, Trulia and Realestate.com.au ushered in the change by listing properties online. Back home in India, numerous online property classifieds sprung to life as information and content became a necessity, from being a privilege. However, none of these companies could crack the full stack model that enables customers to transact real estate in a hassle-free manner. Neither have the transaction costs come down nor has the transaction experience improved in a significant manner.
The year is 2019 and at the Square Yards HQ in Gurgaon, home grown tech; powered by advanced analytics, machine learning and artificial intelligence is at the heart of all operations. Equipped with this advanced platform, the sales personnel at Square Yards have transformed into customer advocates and are accountable for every step in the home buying process; from search and discovery to site visits, transactions, home loans and post sales service. Developed and shaped by years of tweaking and infinite human touches, their tech has evolved significantly and is on its way to becoming an industry standard platform of sorts, for many applications.
Today, the Square Yards network of apps and websites get a traffic of over 1 Million visitors monthly and generate more than 1.5 Million real estate leads annually. Interestingly, these leads are being acquired at a fraction of the cost of traditional lead generation techniques. Yet their tech ensures that every point of contact with a customer, be it a scheduled call, a site visit, a mortgage or post sales documentation is digitally logged, monitored and reported, ensuring high levels of customer satisfaction throughout the home buying lifecycle.
The tech-led model seems to have worked well for the startup. FY 19, which closed recently saw the company continue along its scale up path. With 2,800 employees the startup has reached an annual revenue run rate of USD 40 Million and its Gross Transactional Value (GTV) now stands just short of USD 1 Billion.
It was not always this way though. Square Yards was founded in 2014 by a husband wife duo; Tanuj Shori, an investment banker and IIM – Lucknow alumnus and Kanika Gupta Shori, a Wharton alumnus. Those days the couple lived and worked in Hong Kong. A desire to invest in a property back home in India opened their eyes to the mess that the real estate distribution system was. The ground reality was that India was a USD 120 Billion unorganized property market, with the largest developer having just about 1% market share. Plus, there were no large distributors, half a million small brokers, no regulator and zero data transparency.
A genuine concern to help other NRIs with similar investment needs led Tanuj and Kanika to track critical data points pertaining to a few leading primary projects in the country, which helped them better analyse the risk reward opportunities for potential investors and end users.
The model clicked with home seekers and Square Yards was born. The journey of perpetual scaling up began and over the next few years, the company established its presence in 20 Indian cities and 10 countries to become the largest player in the industry. It also reached a sort of monopoly in the NRI markets of the middle east, led by Dubai. In time, Square Yards scaled up its operations to Singapore, Hong Kong, Australia and Canada and is one of the key players in all those markets today.
However, despite the sheer size of the property distribution opportunity, all kinds of organisations – from new age start-ups to established banks & financial institutions - have toiled to scale up the real estate distribution business in the past but most have failed. With time, Square Yards faced its share of scaling up hurdles too, the biggest being acquiring new talent and training them adequately to ensure consumer satisfaction while maintaining operational efficiency; a problem that has miffed many pioneers before.
By leveraging technology, the start-up has built its digital infrastructure in such a manner so that everything including field sales force, data, products, leads etc can be potentially scaled up infinitely. Tech has solved the data asymmetry, brought process standardization and helped it reach out to a wider target audience. On the internal efficiency side, key business metrics like lead acceptance ratios, first time to response (FTTR) and average met ratios have all improved translating into more site visits and more closures. It has raised its operational efficiency rapidly, beating the industry average and tech enabled its business to scale in a non-linear manner; meaning that the startup was able to grow revenues faster than expenses — especially when compared to traditional peers.
The start-up’s hunger to constantly scale up is insatiable though.
The plot ahead is to invest heavily in people (the startup aims to double its manpower to 5000 in 2019 itself) and technology, to enable more transactions per people employed by streamlining internal processes. Also, in the pipeline is a plan to empower its partner developers and brokers to improve their own efficiencies by adopting tech built and licensed by Square Yards. Edge, their full-service real estate software solution, which has been in development and real-life-testing for some time now is finally ready for use in external environments and third-party setups.
Since its inception, each day at Square Yards is about making a change for the betterment of the real estate distribution system. The greenest pastures are almost always beyond the toughest climbs and already, this young startup is on the verge of joining a handful of start-ups in India who have a Gross Transactional Value (GTV) of USD 1 Billion annually.
As we've seen in the past, every innovative wave in technology has seen a corresponding innovation in real estate. The Microsoft era started to address the industry’s growing demand for better underwriting and back-office tools while the first proptech startups applied the online aggregator model to real estate.
Globally, venture investments into proptech are increasing rapidly in terms of deals per year. 2018 saw around $10 billion in prop-tech funding deals and 2019 is taking investor confidence in proptech to whole new higher levels.
Looking at this shifting landscape of real estate distribution, it is only a matter of time when tech-enabled real estate companies like Square Yards will capture majority market share. These next crop of proptech firms will go on to create fully digital workflows, increasing transparency and efficiency for everyone in the ecosystem, while enabling better decisions at a fraction of today’s costs.
And the real winner here is the market as a whole, and not just the individual players.