The online real-estate sector in India has been in the doldrums in terms of funding and investors interest for a while now. Only two major online real estate start-ups— Gurugram-based ZiffyHomes and Bengaluru-based Nest Away - were able to attract substantial investment in 2018.
Bucking the trend, another Gurugram-based online rental start-up, FastFox, which launched the ‘open house’ model in India, is in final talks with a Chinese investor to raise USD 10 million.
Pallav Pandey and Mukul Bhati, both IIT graduates, launched FastFox in 2014. So far, the company has raised USD 8.5 million from Blume Ventures and LightSpeed India Partners. Anshul Gupta and Siddharth Prakash Singh soon came onboard as partners.
Blume Ventures’ partner Sajid Fazalbhoy said Pallav Pandey’s proven track record as an entrepreneur (He ran Knowlarity- a cloud telephony company) was one of the reasons he decided to invest in FastFox.
‘Indian market is similar to China’
Anshul Gupta believes the company has a lot to learn from Chinese online real estate market.
“During our talks with a few Chinese investors, we found they have a very unique perspective. We are finalising the investment deal of around USD 10 million from a China-based investment firm and will announce it by the end of this year,” Gupta said.
According to him, “A lot of Indian investors are US biased. Typically they come from the US universities, and even though the US and Indian real estate markets are very different, their bias is very much evident.”
On the other hand, Gupta said, the regulations in India and China are similar and having a Chinese investor on board would be an added advantage.
“Indian and Chinese markets have a lot of parallels and, unlike the US, you don’t need a license to be a real estate agent here. You just need the right information. India’s structuring is also similar to China’s. China is quick at adopting technology and acts as a bellwether of India’s technological advancements,” he said.
Chinese landlords take three months’ rent in advance and don’t have to meet tenants face-to-face. The rent is paid through online real estate companies, which act as the middlemen. The real estate companies make money on margins and also offer loan services to tenants.
Danke Apartment, Mofang Apartment and Ziroom (which recently raised USD 578 million earlier this year) are the major players in the online rental space in China.
Using AI to better search results
FastFox, launched in 2014, was using technology only at the back-end in the early days.
“Pre-2016, we were trying different models and were essentially working in a traditional way. It was a house-broker model, where we guided and coordinated with tenants to find a house of their choice,” said Gupta.
Gupta said the company has started using machine learning technology to sort houses in alignment with the tenants’ requirements from a list of 5,000 plus properties. FastFox claims to have set around 800 parameters including the number of rooms, floor, parking area, amenities, access, and mobility, among others to optimise the matching process.
“We were technologically inclined even then but now the technology plays a far better role than it did before 2016,” he said.
Earlier this year, FastFox went overboard with technology adoption and launched a 3D walk through, which allowed prospective tenants to take a virtual tour of the buildings. However, Gupta soon realised it didn't add any value and put the service on hold.
“Our users told us, it was fancy, but not productive. The whole virtual reality aspect that we tried to tap into for 3D walk through is not as advanced and real. It’s still very much digital in its look and feel,” he said. The 3D walk through pilot, which lasted for about three months, will make a comeback soon in a better avatar, he added.
In 2016, FastFox launched the ‘open house’ concept to test waters. The open house model eliminates the need to coordinate with house owner or the broker as prospective tenants are allocated a time to check out the house, which would be open.
“We realised people don’t need an assistant to locate, get keys and show them around the house. So we piloted the open house earlier in 2016, and we like the way it’s shaping up,” Gupta said.
Gupta claimed the company closes more than 500 rental deals every month. “These are mostly in Gurugram as of now, but we are slowly expanding our footprint to Pune,” he said.
The main competitors are offline brokers, not online real-estate players
FastFox claims it doesn’t face a lot of threat from major players like Nest Away, No Brokers or Quikr. The firm’s main competition, according to Gupta is the independent house brokers who have set shop in every nook and corner of India.
Fazalbhoy believes house brokers play a pivotal role in the real-estate. “40% of urban India lives on rent and USD 2 billion is spent on brokerage every year in the top eight cities alone. We have around 500,000 brokers across the country doing 6.6 million net worth of transaction. Home seekers struggle a lot to find houses through classified portals and this is the problem FastFox is set out to address,” Fazalbhoy said.
Gupta said if someone puts up their phone number and requirements on any online classified portal, they will get around 70-80 calls in an hour. “But that’s not going to cut it. It takes exorbitant levels of commitment to close the deal and find the perfect landlord for a tenant and vice versa,” he said.
Gupta believes the best way to deal with the competition is to take them under your wing. FastFox now works with more than 100 house dealers.
Fazalbhoy calls FastFox’s model a 2.0 version of online classified business. “We go out, get curated lists, coordinate with brokers, show relevant inventory and close the transaction. We are a full stack startup,” he said.
Four months into the launch, FastFox has not been able to acquire a lot of properties in Pune. Gupta said, “Real estate is a depth-centric business. I can’t have 50 properties across Pune, it has to be 50 in just one area. That is why we don’t launch in the whole city at once. We do it area by area. It does take time. He did not reveal the number of properties the company has in Pune.”
With its Series B funding round expected to close by December, FastFox plans to enter three more cities by the end of this financial year. Gupta said the funding will help them hire more people, invest in technology and inventory.
Ruiyao Luo contributed to the story.