India accounts for highest number of proptech deals in APAC; China bags most funds

A boy plays on a swing suspended from a tree in front of a residential estate under construction in Kolkata October 31, 2011. REUTERS/Rupak De Chowdhuri

India has attracted the highest number of deals in the property technology startup space in the last four years while Chinese proptech firms accounted for maximum funding in value terms since 2013, according to a recent report by international real estate consultancy company Jones Lang LaSalle (JLL).

Within Asia Pacific, proptech startups can be classified into four main verticals: brokerage and leasing, investment and financing, project development and property management.

According to the JLL report, 179 proptech startups in Asia Pacific have raised funding since 2013, accounting for almost $4.8 billion of the $7.8 billion global deal value since 2013.

“While bulk of inflows have gone to Chinese start-ups focused on mainland China’s roughly $6.6 trillion total investable commercial real estate universe, investments into other markets, namely, India, Southeast Asia, Australia and Northeast Asia, have begun picking up,” said the report.

“In addition, startups have progressed in their technological capabilities, going beyond online portals to incorporate emerging technologies such as Bitcoin into their services,” it added.

In the APAC region, start-ups operating in brokerage and leasing occupy the largest share, followed by property management, project development and finally, investment and financing. Of the total 179 funding deals, 94 are in the brokerage and rental space where they serve as the channel or marketplace between brokers, property owners and purchasers.

China grabs lion’s share in funding

Even though only 23 out of the 179 proptech startups that were funded came from Mainland China, they got the lion’s share of the total funding as they raked in nearly 60 per cent of APAC’s total funding.

Leading the pack was Chinese online broker, which raised $1.69 billion from investors like Huasheng CapitalBaidu Inc.Tencent Holdings Ltd. and China Vanke Co Ltd.

Besides Lianjia, other three prominent proptech unicorns in the country include Mofang Gongyu, which is stated to be one of the largest institutional rental apartment operators in China; Fangdd – an O2O platform and Aiwujiwu – an online real estate agency.

Millennials’ drive to purchase a house has provided a great push to the brokerage and leasing startups in Mainland China, along with higher penetration of technology.

Apart from Mainland China, brokerage and leasing is also the most popular vertical among Hong Kong startups, showed the report. Several sub-verticals in brokerage and leasing that Hong Kong’s startups are concentrated in include sales, marketing and CRM, and smart home fixtures and controls.

In Hong Kong, however, a large proportion of funding in the investment and finance vertical for China (including Hong Kong) is attributed to WeLend, a Hong Kong-based proptech startup that managed to raise $160 million in Series B funding.

Seed stage deals rule India proptech space

Rapid urbanisation and rising middle class in India, has catalysed the growth of proptech startups in the country, providing opportunities beyond property listing. At 77 out of 179, India has the largest number of proper startups that received funding over the last four years.

However, unlike China and Hong Kong, the majority of the deals were at the seed and angel levels.

While brokerage and leasing dominate India’s proptech scene, the activity in the project development and property management verticals is growing with services such as residential home improvement/design such as Livspace and maintenance Homejoy.

With 60 million new homes expected to be built between 2018 and 2024, demand for such services in India can only increase, said the JLL report.

However, this space is also undergoing a phase of consolidation led by SoftBank-backed‘s acquisition by News Corp-backed PropTiger in January 2017 in an all-stock deal. It  was reported to receive $50 million in fresh funds from News Corp.’s REA Group Ltd and $5 million from SoftBank Group.

Startups need to tap region to reach scale 

Proptech space in Southeast Asian countries is small and fragmented with just a few mature startups leading the pack compared to their counterparts in China and India.

As in most regions, brokerage and leasing vertical received 96 per cent of the total funding in this space led by Singapore-based TPG Capital-backed PropertyGuru, which had raised $130 million.

“Within the region, Singapore with its supportive startup ecosystem is the obvious leader. However, Singapore’s limited population and size is not ideal for scaling. The growth trajectory of Singaporean proptech startups like PropertyGuru would be to operate throughout the region to gain sufficient scale,” said the JLL report.

Another notable deal was Malaysia’s iProperty Group’s acquisition by News Corp’s Australian real estate website company REA Group Ltd for $414 million in 2015.

Other countries like Indonesia and Thailand also have some local property search portals but their scalability remains largely unproven given limited product sophistication and relatively underdeveloped markets.

However, JLL’s report states that the consumer focus of proptech start-ups in Southeast Asia may prove a boon in the long run.

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