“Most of the money [in real estate] is being made in the transaction business (brokerage and co-living), which is the HDFCRealty business, that’s why Quikr acquired them,” said the QuikrHomes executive, who was quoted earlier. Platforms like PropTiger, Quikr Realty, and Makaan.com, he points out, are essentially online brokerage firms with an offline presence. “They predominantly get their revenue from brokering a deal, but all online,” the executive added.
The allure is clear: “There is no doubt about it…the return on investment is the highest on brokerage. Irrespective of industry, for any industry, transactions will have the highest volume, because it is the final conversion for which the company is paying us,” says the same executive.
High risks come with great reward
But with high reward comes high risk, and Quikr’s brokerage business is no different. “The closer you move to a transaction, the more expensive it becomes,” says QuikrHomes executive quoted above. It isn’t enough for Quikr to get the ball rolling; a deal falling through at the final hurdle means that all the time and effort spent brokering the deal would see no payout.
Quikr’s confidence with its brokerage play stems, at least in part, from its experience managing transactions with rentals platform Grabhouse. Grabhouse runs on an emerging business model based on the concept of co-living. This involves property owners and Grabhouse coming together to provide rooms targeted at working professionals and bachelors. The tenant pays a monthly rental for the room, which is inclusive of facilities like WiFi, appliances, beds, maintenance, etc. Grabhouse takes a cut of monthly rentals since it also manages the rent collection.
With its Quikr Realty platform set up, Quikr now encompasses all three online real estate business models: classified listings and lead generation, managed rentals, and brokerage. The real estate puzzle for Quikr is finally complete. With this in place, Quikr should be an online real estate juggernaut. But that hasn’t happened.
Scrapping it out
The battle right now—for everyone online and offline—is to sell off some 600,000 residential and commercial units that currently lie unsold across the country. And the road forward is proving to be rougher than Quikr had anticipated.
“When you talk about oversupply, brokerage firms get impacted most by this, but classifieds firms don’t. If you have more supply in the market and it’s difficult to sell, brokerage firms will find it difficult to keep earning revenue, whereas classified platforms would actually flourish then since more supply means more ads,” says a 99Acres executive, who asked not be named since he is not allowed to comment on competitors.
As such, Commonfloor should be flourishing. Indeed, Commonfloor’s business head Nimesh Bhandari insists the oversupply issue is a boon for Quikr. “To an extent, oversupply that we are seeing in few localities…helps our business. There is more marketing spends available for the broker or the builder to actually find the demand for their properties,” says Bhandari. But more ads doesn’t always mean more conversions. When The Ken inquired about Quikr’s conversion rates, the company refused to comment.
Desperation to sell
You see, while there may be more advertising in a market where everyone is desperate to sell, there are more than a few issues. Are the ads genuine? And even if they are genuine, how much inventory actually gets sold online? The answer does not bode well for Quikr’s fortunes.
According to Anuj Puri, Chairman of ANAROCK, roughly 20% of any new real estate project’s business comes from the online channel. The remaining 80% still happens via offline channels such as brokers and hoardings, says Puri. Builders’ marketing spends are allocated accordingly.
“As per stats, nearly 30% of the ad spend of a builder is spent on online marketing, while a whopping 70% is spent on print ads. While the former is the cheaper option, the latter is more effective but very expensive,” adds Puri. And even this 30% is not Quikr’s for the taking. It has at least five other companies hungry for their share of the pie. So much for the classifieds business.