#Asia India’s real estate startups get heated as property cools

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how startups in india are luring japanese investors

Photo credit: David Gil

The real estate space in India has seen a lot of action in the last couple of years. Big funding rounds in tech startups disrupting the sector were followed by belt-tightening. This was evident in a management shakedown and layoffs in Housing months after a US$100 million funding round from SoftBank. There has also been a spate of acquisitions in recent months by Housing and its rival CommonFloor, as well as News Corp-backed PropTiger which bought Makaan.

But for weeks there has been speculation over a bigger shakeup in this fragmented market – that Google Capital-backed CommonFloor is up for grabs. Anonymous “sources” have even been sending journalists like me emails about Japan’s Recruit Holdings nabbing a big stake and so on. Indian media have put out unconfirmed reports of classifieds website Quikr buying out the eight-year-old Bangalore-based startup.

Tech in Asia reached out to CommonFloor, and this is what it says:

We are in the middle of fundraising, and there are multiple options on the table. We have not yet finalized one. We are working at multiple levels to ensure our growth takes place in a sustained manner. As a company policy, we do not comment on speculations, therefore kindly hold on as we will inform all the stakeholders when the time is ripe. We are committed towards our vision of organizing the real estate industry in India.

commonfloor founders

(From left:) Lalit Mangal, Sumit Jain, and Vikas Malpani, founders of CommonFloor

Indian Institute of Technology (IIT) Roorkee graduates Sumit Jain and Lalit Mangal started CommonFloor in December 2007 with another technologist and friend Vikas Malpani. Initially, the plan was to build an online space where people living in apartment complexes could collaborate to solve problems. It grew into a real estate portal when people started posting their houses for rent or sale on the site.

See: CommonFloor’s road-map of hurdles, pivots, and triumphs

In January this year, Google Capital invested in the company – this was only its second investment in India.

Ripe for consolidation

Quikr, which is the Indian rival of global classifieds site OLX, is one of the most highly funded startups in India, with Tiger Global leading a US$150 million funding round earlier this year. A couple of months back it opened up new verticals in high value sectors like real estate and automobiles. The acquisition of CommonFloor, if confirmed, will deepen its reach into the market.

Since CommonFloor began as a community platform to solve the problems of apartment dwellers, it has a more intimate relationship with its users than most real estate portals. If the Quikr acquisition turns out to be true, this could complement QuikrHome’s rapid expansion across India.

The possible consolidation in this space is also related to a correction in the real estate market following excessive investments into projects. Consultancy firm Knight Frank sees a marked slowdown in the sector with homes remaining unsold as supply exceeds demand in several major cities. This naturally affects the tech startups operating in this space. Thus the situation is ripe for consolidation. CommonFloor will need a big infusion of funds to stay the course. What form that takes will become clear in the days ahead.

See: What are the hottest sectors for venture capital in India this year? (INFOGRAPHIC)

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