Gurgaon-based Square Yards claims to have facilitated real estate transactions to the tune of $250 million GMV for India and $50 million GMV for global real estate in its first year of operations.
Life's lessons do not always hurt. They also show us the way. That's true at least in the case of the husband-wife duo of Tanuj Shori (36) and Kanika Gupta (32) who were prodded by their own problems to start Square Yards, a real estate advisory firm to help NRIs invest in Indian real estate.
Founded in October 2013, the Gurgaon-based Square Yards claims to have facilitated real estate transactions to the tune of $250 million gross market value (GMV) for India and $50 million GMV for global real estate in its first year of operations.
Prior to 2013, IIM alumni Tanuj and Kanika lived in Hong Kong where they worked as investment banker and wealth manager respectively. When they wanted to buy property in India, they were disappointed by the lack of information, services, inaccessibility of quality research, requisite support and post-transaction follow-up.
Mulling over this peculiar problem opened their eyes to the idea of creating a platform to provide insights on various investment options and hand-hold real estate investors by offering 360-degree support including home loan facilitation and mortgages.
Today, Square Yards closes around 1,000 transactions a month with an annual revenue run rate of $25 million. On the mortgage side, the company distributes loans worth $50 million every month.
The company raised $10 million from multiple investors in the form of convertible notes in January 2017.
Square Yards follows an online-to-offline (O2O) approach for customer acquisition and service delivery. Their web portal offers deep research, data-driven insights, and decision tools that help investors zero in on a location or project. Through online channels, the company generates more than 75,000 leads per month.
They then assign these leads to the salesperson closest to the customer's location. The salesperson then assists in property research, coordinates site visits, and helps in closing the deal with the developer.
Then comes into play the in-house mortgage team which provides loan advisory and documentation facilitation. For facilitating transactions, they bring the entire project inventory online through the proprietary e-commerce platform where customers can choose and block the desired unit by paying the booking amount online.
After-sales service is supported through a dedicated client portal for quick resolution of service requests.
“On the transactions front, we have closed more than 11,500 deals with a combined gross transactional value (GTV) of more than $1 billion in the last three years since inception. On the search and discovery side, our portal attracts more than 1.2 million unique visitors a month and the traffic is growing at a rate of 10 percent month on month,” says Tanuj.
It was not that easy!
Many developers that Square Yards dealt with in the past failed to deliver projects on time, affecting their collection cycle and leading to disputes with clients. To resolve these issues, the founding team has developed practices such as developer due diligence, investment advisories, escrow mechanisms, and tripartite agreement structures involving the developer financing entity.
Moreover, with the introduction of the Real Estate (Regulation and Development) Act, 2016, the ecosystem is likely to be steered towards greater transparency. The act is tailored to protect home buyers and fuel investments in the real estate industry.
Cash burn vs cash flow
For every property sale, Square Yards charges a commission (two-10 percent of the property value) from the property developer. The client is not charged for the services rendered.
Similarly, for every loan facilitated, they charge banks/NBFCs a commission on the value of the loan disbursed. “Within Indian real estate, NRIs contribute more than 40 percent of our revenues. Capital (loans and mortgages) and international real estate roughly contribute around 10 percent each of the overall revenue. We have acquired real estate licences in various countries,”says Tanuj.
Real estate consultant Rounak Goklaney says though the opportunity in the online real estate space is plenty, the means to get into many untapped verticals are very limited. Commercial office space and non-agricultural land are still in an unorganised state and the huge opportunity lies in organizing the same.
Though 99acres and Magic Bricks have postings related to non-agricultural land but they are very limited and most of them are not genuine in the first place. Opportunities are there but lots of limitations are also involved in terms of getting into online.
"The challenges for startups in online real estate is that people hardly entertain small companies when it comes to buying property. Moreover when NRIs plan to invest in India, they always prefer to close the deal through an established firm. Any startup will face this issue initially but can subsequently reduce this by fousing on one niche area," says Rounak.
Square Yards currently has 1,400 employees spread across 32 cities in 10 countries including major cities in India and global locations like the UAE, UK, Singapore, Hong Kong, Malaysia, Canada, Australia, Oman, and Qatar. Tanuj says 15 percent of his workforce comes from locations outside India.
Square Yards has good working relationships with more than 500 A-grade developers who offer blue-chip projects globally. The company claims to have a net revenue run rate of $1.5–2 million per month (annualised ~ $25 million).
The Indian real estate market is expected to touch $180 billion by 2020 with the housing sector alone contributing five–six percent to the country's Gross Domestic Product (GDP), according to a report by the India Brand Equity Foundation. The report further states that the real estate sector is expected to incur more NRI investments in both the short term and the long term. Bengaluru is likely to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun.
Square Yards plans to expand to more than 25 international markets and invest aggressively in Square Connect—a broker aggregation platform—and Square Care—a dedicated property management service for its NRI clientele.