Media DART Consulting Forecasts 12% Growth for Indian PropTech Industry from 2023 to 2027

DART Consulting Forecasts 12% Growth for Indian PropTech Industry from 2023 to 2027

01 July 2024
DART Consulting Forecasts 12% Growth for Indian PropTech Industry from 2023 to 2027

PropTech: Revolutionizing the Real Estate Sector

PropTech refers to the use of technology to innovate and streamline various aspects of the real estate sector, including property buying and selling, renting, property management, construction, and more. Here is an outline of the sub-sectors or elements of Property Technology. The PropTech industry has undergone substantial growth and transformation in recent years.

Elements of PropTech

PropTech Category Description
Property Management and Operations Technologies and software to streamline tasks like rent collection, maintenance, and lease management. Also includes IoT devices for smart building management.
Real Estate Marketplaces Online platforms connecting buyers, sellers, renters, and investors with property listings and information. It may include features like virtual tours and property valuation tools.
Property Financing and Investment Solutions for property financing, including crowdfunding platforms, blockchain-based transactions, and tools for analyzing investment opportunities.
Construction and Development Innovations in construction such as Building Information Modelling (BIM), robotics, and 3D printing. Also, project management software and sustainable building practices.
Tenant and Customer Experience Technologies that enhance the experience of occupants, like community portals, event management tools, and customer relationship management (CRM) software.
Regulatory and Compliance Tools Technologies assisting with legal aspects of real estate transactions, regulatory compliance, and data privacy and security solutions.
Property Data and Analytics Platforms for collecting and analyzing property data to provide insights into performance, market trends, and investment opportunities. Includes predictive analytics.

Market Overview

The Real Estate sector in India was historically one of the slowest-growing segments post-independence. Of late, this sector witnessed remarkable transformation driven by changes in statutes and regulations, combined with improved economic activities. The reforms paved the way for the Indian real estate industry to evolve into one of the fastest-growing sectors and the industry is estimated to grow at a compounded annual growth rate (CAGR) of 15% in the coming years.

In 2023, PropTech investments have surged significantly, accumulating a total investment of over US$4 billion. Among the various segments within the PropTech industry, shared economy platforms, including co-living and co-working spaces, as well as the sales and marketing segments, have attracted the lion’s share of investments, collectively representing 64% of the total investment inflow. This surge in investments underscores the rapid expansion and transformative potential inherent in the PropTech sector.

Notably, the real estate sector also assumes a prominent role in contributing to India’s Gross Domestic Product (GDP), accounting for approximately 6% of the nation’s total GDP. This sector can be further categorized into three main segments: residential, commercial, and retail. The residential segment is the largest contributor, representing around 80% of the overall Indian real estate market. The commercial sector encompasses office spaces, industrial parks, warehouses, and related properties, while the retail segment encompasses shops, malls, and shopping complexes.

Key Players in PropTech

Company Description Fundings Lead Investors
MagicBricks An online real estate portal, connecting property seekers with verified listings, expert insights, and financial services for streamlined property transactions. US$300 million Times Internet
Furlenco A subscription-based furniture rental platform that allows users to rent furniture on a monthly basis. US$265.2 million Sheela Foam, Klub, TradeCred, Zinnia Global Fund, BlackSoil, Aditya Burman
NoBroker India’s direct property platform, eliminating brokers, offering listings, rent payments, and home loan services for a streamlined real estate experience. US$430.9 million Google, General Atlantic, Moore Strategic Ventures, Tiger Global Management, Trifecta Capital Advisors
Infra.Market A construction solution Unicorn that is creating a multi-product building materials brand, transforming the ecosystem through leveraging technology and scaling innovation. US$406.6 million Mars Growth Capital, Navi Technologies, Avendus Capital, Tiger Global Management, Alteria Capital, InnoVen Capital
Livspace An interior design startup that offers a platform that connects people to designers, services, and products. US$431.6 million Kohlberg Kravis Roberts, Saint-Gobain, Trifecta Capital Advisors, Kharis Capital

Key Trends

Rapid Growth: PropTech investments in India have consistently grown. With inbound interest in the sector, infrastructure and real estate scaling, and signs of tech adoption being seen from the market, the space has recently witnessed increased funding.

Diversification: The PropTech industry has diversified into various sub-segments, including construction technology, co-living, co-working, interior design, and decor, showcasing its adaptability and innovation.

Regional Expansion: Tier 2 cities have emerged as new growth hubs for PropTech, offering untapped markets and opportunities beyond metropolitan areas.

Growth Drivers

Technology Adoption: Widespread technology adoption across the real estate lifecycle, from property discovery to purchase, is a primary driver. Technology integration reduces costs, streamlines processes, and enhances the overall customer experience. The industry has identified six disrupting technologies that are currently reshaping businesses worldwide and significantly impacting real estate. These are Software-As-A-Service (SaaS) / Cloud Computing, Artificial Intelligence (AI), Internet of Things (IoT), Robotic Process Automation (RPA), Virtual Reality (VR) / Augmented Reality (AR), and Blockchain.

Investor Confidence: Investor confidence, especially in shared economy platforms like co-working and co-living, has been a driving force behind significant funding. The perceived growth potential in these segments has bolstered investor interest.

Post-COVID Acceleration: The COVID-19 pandemic acted as an accelerator for PropTech adoption. Lockdowns and restrictions prompted the industry to embrace digital solutions, making technology an integral part of real estate.

Investment

In 2023, the Indian PropTech industry recorded substantial investments, totaling US$4 billion. This growth signifies the sector’s resilience and expansion in the face of global challenges. Notably, there were significant investments in demand-side technologies, particularly in sales and marketing. Additionally, the supply side, represented by construction technology, also attracted substantial funding.

The PropTech sector in India holds the potential to drive promising Foreign Direct Investments (FDIs), crowdfunding, and institutional investments. It emerges as a crucial area to monitor, especially within the Indian market. Thanks to its heavy reliance on technology, the industry demonstrated a remarkable recovery post-COVID-19 and is experiencing rapid growth in alignment with Digital India, the flagship initiative of the Government of India aimed at transforming the nation into a digitally empowered economy.

Regulations

Operating the intricate regulatory landscape of the Indian real estate sector poses significant challenges for PropTech companies. The complexities in regulations pertaining to housing and commercial properties can create obstacles that affect the ability of PropTech firms to prioritize customer interests. Various schemes and missions under the Ministry of Housing and Urban Affairs (MOHUA) have been implemented to promote sector-specific growth and bolster the Make in India initiative.

The Digital India Land Records Modernization Programme (DILRMP), launched in 2016, is significant in this direction. However, as of 2022, only 58,10,300 plots in 18 states and Union territories have so far been surveyed and ULPINs assigned. Under this programme, a few new initiatives are as follows:

  • National Generic Document Registration System (NGDRS) – To provide one Nation one software for registration of documents & properties to ’empower citizens’.
  • ULPIN – Unique Land Parcel Identification Number to uniquely identify every surveyed land parcel in India.
  • Linking revenue court to land records.
  • Integration of consent-based Aadhar numbers with land records.

As of 2022, National Generic Document Registration System (NGDRS) has been implemented in 12 states (2022) – Punjab, Goa, J&K, Manipur, Mizoram, Daman and Diu, Jharkhand, Himachal Pradesh, Maharashtra, Chhattisgarh, Tripura, and Andaman and Nicobar Islands.

The Housing Technology Sub-Mission (TSM) was launched in 2021 to encourage the adoption and promotion of modern, environmentally friendly, and disaster-resilient technologies in the housing sector. Under this scheme, the Indian Housing Technology Mela (IHTM) was organized to showcase indigenous and innovative building and construction materials. Additionally, the program facilitated the establishment of five incubators to provide support for emerging technologies within the Indian real estate market. These initiatives are intended to streamline and enhance the PropTech industry’s role within the regulatory framework while fostering innovation and sustainability.

Challenges and Opportunities

Regulatory Complexities: Navigating regulatory complexities, particularly in the heavily regulated housing and commercial real estate sectors, especially land registration and accessing land records, remain a challenge for PropTech companies. Balancing regulatory requirements with customer-centric approaches is critical.

Profitability in High-Ticket Markets: Achieving profitability in a PropTech sector known for high-ticket transactions is a challenge for many startups. Building sustainable business models catering to diverse customer needs is crucial.

Land Ownership Digitization: Efforts to streamline land ownership rules and digitize processes in key states offer promising prospects. Such initiatives can reduce inefficiencies and enhance transparency in the real estate sector.

Conclusion

The Indian PropTech sector stands on the threshold of expansion and innovation, playing a pivotal role in the transformation of the real estate industry. The next revolution occurs with the completion of digitization of land records. As of now, the government schemes in connection with the land records are not fully implemented, and their completion will boost the PropTech market.

Globally, the property management software market is projected to grow at a CAGR of 10%. The growth rate of the real estate marketplace in India has been estimated to be around 5% in the coming years, according to market data. The growth percentage of the real estate market in India has been considered as 15% in the coming years based on DART Consulting's estimate. According to market projection, this sector in PropTech is poised to maintain robust growth, with a projected compound annual growth rate (CAGR) of 9.5% till 2023. However, this sector attracted investments in the recent past. The current technological trends as mentioned under Technology will substantially boost the remaining sub-segments like Property Financing and Investment, Construction and Development. The sub-segments like Property Management and Operations, Real Estate Marketplaces, Tenant and Customer Experience, Regulatory and Compliance Tools, Property Data and Analytics will experience substantial growth with the digitization of records. Also, the growing technologies will impact all sub-segments to some extent in the coming years.

The combined efforts of emerging startups and their innovations are expected to increase substantial investments from both private investors and government initiatives. With a considerable number of positive factors, PropTech is expected to grow at a CAGR of 12% over the next five years, from 2023 to 2027. The industry will record exponential growth once the digitization of land records is completed and regulatory corrections are done in favor of PropTech.

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