Why Real Estate Portals Need To Change Revenue Model To Succeed

Housing.com has recently been in news for its talks with ecommerce firm Snapdeal and News Corp, backer of rival real estate portal PropTiger, for a prospective strategic sale. Although negotiations are at a preliminary stage, the deal will fructify only if Housing is able to demonstrate its growth and revenue targets in the 'buy and sell' business, said sources.

Even as the number of real estate portals is mushrooming in the country, what is posing to be a big concern for most of them is the lack of revenue model as they are primarily focussed on helping users to find property online!

At the time of starting up, realty websites had laid immense emphasis on acquiring ‘online’ customers – the first step when most of them have received private equity or venture capital funding. However, the step to build revenue – and scale to the next level – was one area that was neglected.

Currently, most of the startups operating in this space including 99Acres and Housing.com, thrive on advertisements from developers. In addition, there are some other firms like PropEquity, which are also into research and offer subscription based real estate data, analytics and market research reports, which they submit to investment firms and banks. Experts tracking the sector say these measures alone are not sufficient to help them zoom into profitability or even break-even for that matter.

For proper sustenance, they also need to chart out their path of monetization. Also, the market currently is over-saturated with too many players operating in the country. These include names like MagicBricks.com, Indiaproperty.com, makaan.com, among others. What’s more, the real estate sector is also going through a deep recession and it has not been able to revive very well after the boom period of 2007 that led to a crash in the sector.

“We are seeing a lot startups mushrooming in the country across all sectors including real estate. Having startups is not a problem as they come up with new innovation and help generate employment. But the real issue is that there is too much capital chasing these start-ups which in turn is inflating their valuations,” Ashwinder Raj Singh, CEO, Residential Services at Property consultancy firm Jones Lang LaSalle told BW Businessworld in an earlier conversation

Even as most of these start-ups lack proper revenue stream, they are spending significant amounts on advertisements, which is resulting in bigger losses for some firms. As a result, while some portals are surviving, most of them are reeling under pressure and living on investor money. The only way these portals will be able to survive is to build revenues and for that they will have to restructure their business model and get into the broking space directly, said exoerts.

Also, going forward, the real estate websites that have evolved over the past few years to offer features beyond listing of properties may see consolidation in the next few months.