- One of India’s leading realty verticals, Housing.com, surprised market watchers in January when it raised $90 million U.S. from Japanese major SoftBank.
By Shilpa Shree; reposted with permission from AIM Group‘s Classified Intelligence Report.
One of India’s leading realty verticals, Housing.com, surprised market watchers in January when it raised $90 million U.S. from Japanese major SoftBank.
This was welcome news for a company struggling to stay afloat and on top of an increasingly competitive property market. The company is behind its own revenue projections, and costs are high.
“Somebody needed to fund the deficit to keep the business alive while it figures out some way of making money. That is probably the reason,” said Mahesh Murthy, managing partner and co-founder of venture firm Seedfund.
The Indian vertical is also potentially trying to raise an image of solidity with the fund raising in anticipation of a future merger.
“[The funds were raised] To pass a strong message that they are still a valuable invest-
ment, to further strengthen their real estate business analytics capabilities and improve their valuation during talks of mergers with other entities in the online real estate space begin,” said Sanchit Vir Gogia, Chief Analyst at Greyhound Research, a research and advisory firm.
2015 was a bad year for one of India’s biggest success stories
Founded in 2012, the downfall for the company began with the unceremonious ousting of founder Rahul Yadav in mid-2015 after he turned against the company’s investors (which include Sequoia Capital) in a public spat over strategy.
Another incident that had a major impact on the brand is the firing of 800 employees in the second half of 2015. Gogia believes it was a strategic decision.
“Firstly, Housing.com decided on home buy/sell as their core category. Hence, they let go of people in categories they were shutting down, such as short stays and commercial properties, among others. Secondly, Housing.com chose to continue running shop only in large cities and towns and not expand. Staff hired for expanding to new cities had to be let off also,” he said.
These events have tarnished the company’s brand image, both in the eyes of local consumers and developers.
“During my meetings with builders who had been our customers earlier, they only discuss the ousting of Rahul Yadav from the company. We are working very very hard to overcome these hurdles,” said a Housing.com employee on a condition of anonymity.
Murphy believes the company may have just relied initially on expensive ad campaigns rather than on solid offerings.
“I’m not sure there was a brand image. A brand image is not built with advertising — it’s built with user experience. While there was that famous and mindless ad campaign, traffic went up — and now that it has stopped, the traffic has fallen by a huge margin, to much less than traditional offline and domestic players,” he said.
The macroeconomic situation in the real estate sector is also not helping the company.
The slowdown coupled with a low buying sentiment in the market has made developers very conservative when it comes to marketing campaigns.
Still opportunity to turn business around
Nonetheless, a savvy investor like SoftBank does not plough almost $100 million U.S. into a business it expects to fail. There are still positives for housing.com.
“A revival in consumption demand led by a higher GDP growth and industrial production should turn the fortunes of the real estate sector. Slowed new project launches should further aid in faster use of the existing inventory, particularly in the residential segment,” said Vaibhav Gupta, an Associate Partner with Dhruva Advisors LLP, a financial advisory firm based in New Delhi.
The company has also been busy trying to improve its marketability and efficiency. It has appointed Snehil Buxy, one of the co-founders of housing.com, as CPO.
The company even entered into an exclusive one-year partnership with ICICI Property Services, a division of ICICI Home Finance Company. This partnership enables housing.com to organize virtual exhibitions, which will see participation from various leading developers across India.
Another addition was the recent launch of ‘Routing’, a feature that allows consumers to search for a house, based on commute time or on-road distance from any specific establishment like a school, workplace, hospital or railway station. The company claims that a week after the soft launch of this feature, it witnessed an almost 40 percent surge in engagement (properties viewed per user).
The company states that it currently receives 200,000 unique visitors on a monthly basis.
© 2016 Advanced Interactive Media Group LLC / Classified Intelligence, reprinted with permission