The real estate industry in India has always been one to frequently undergo significant changes, especially over the past decade. The enactment of theReal Estate (Regulation & Development) Act, 2016, along with other such statutes, has brought in a sense of authority, regulation, and control in the sector which has enabled real estate developers, buyers, and the State to develop a sense of confidence in the sector. Amongst the many changes, the most significant and notable change is the emergence of PropTech – the blend of innovations brought by the present age technology and its impact on the way people purchase, sell, rent, and manage real estate.
In layman terms, Property Technology (“PropTech”) refers to the usage of technology to enhance the efficiency and effectiveness of the real estate sector. The availability of real estate properties on mobile applications like MagicBricks, 99acres, for transacting with the same; or for that matter, the availability of accommodations in various commercial properties like hotels, etc., can be considered the most rudimentary example of PropTech. Some of these PropTech startups have, in fact, also started providing title check / due-diligence services to the potential clientele which has further made it easy for a person to purchase property through their solution platform. Many PropTech solutions have even made it possible for transacting parties to avail funds in the form of loans, etc., to ensure that they are in fact able to purchase or sell the property. Real estate sector in India has always been slow to adapt to changes but PropTech has been a game-changer in this sector, providing innovative solutions to the age-old problems of the real estate industry. Therefore, this Blog Post will discuss the development of PropTech in India, its impact on the real estate industry, and the future of PropTech in India.
Real Estate Industry in India – An Overview
The Indian Real Estate sector was one of theslowest growing sectors post-independence due to archaic laws prevalent in the country. However, due to the change in statutes and regulations over the period of time, the Indian real estate industry was able to become one of the fastest growing sectors. According to a report jointly prepared by theNational Real Estate Development Council (“NAREDCO”), the sector is expected to grow at a compound annual growth rate (CAGR) of 19.5% from 2017 to 2028. The sector also happens to be one of the major contributors to India’s Gross Domestic Product (“GDP”), accounting for approximately6% of India’s GDP. The Indian real estate sector can be divided into the following sectors – residential, commercial, and retail, with the residential segment contributing toabout 80% of the total Indian real estate market. The commercial segment consists of office spaces, industrial parks, warehouses, amongst others; whereas the retail segment includes shops, malls, and shopping complexes. However, despite being one of the fastest growing sectors, the real estate industry in India is still facing several challenges, including, but not limited to, the lack of transparency, standardization, and slow adoption of technology in the Indian market. Such challenges are being addressed simultaneously with the advent of PropTech as the industry is undergoing a visible change.
PropTech in India – Background and Benefits
PropTech is primarily a technology-driven solution that is involved in bringing substantial change in the traditional real estate industry. These solutions range from online marketplaces that facilitate all kinds of transfer of property, to property management platforms that connect landlords with potential tenants to manage their properties efficiently. The Indian PropTech industry, though in a nascent stage, has vast growth prospects. Thisgrowth of PropTech is being influenced by the increasing use of technology by the Indian population at large, the Government’s focus on digitization, and the ever-growing demand for affordable housing. PropTech has been able to transform the real estate industry by making it more efficient, transparent, and accessible, with
While India has emerged as one of the hotbeds for PropTech innovation in recent years, the Indian real estate market was slow to embrace the technology. However, the COVID-19 pandemic accelerated its adoption. According to the same report ofKPMG and NAREDCO, the PropTech market in India is expected to grow at a CAGR of 9.6% from 2015 to 2025. Further, a report by Housing.com (a PropTech organization) states that the Indian PropTech market received an overall private funding of USD 3.42 billion, from 2009 and as on June 2022. According toTracxn, India’s PropTech industry has seen substantial growth, with over 1124 PropTech startups being operational in the country. These startups are utilizing recent technological advancements such as Artificial Intelligence (“AI”), Machine Learning (“ML”), blockchain, and the Internet of Things (“IoT”), amongst others. Some of the ways in which PropTech has revolutionized the Indian real estate industry are:
a) Transparency: By using PropTech, the real estate industry in India has become more transparent due to increased access to hitherto inaccessible information. Online platforms such as MagicBricks, Zolo, and 99acres have made it easier for buyers and sellers to access information about properties, prices, and amenities. This has effectively helped in reducing the intermediaries between the people who own the real estate and the people who want to obtain the real estate, be it seller-buyer, landlord-tenant, developer-purchaser, etc.
b) Efficiency: PropTech has helped in making the process of buying, selling, and renting real estate properties more efficient, than in the traditional system. Online marketplaces, such as PropTiger and Housing.com, have been able to streamline the process of property transactions, reducing the time and effort required to complete a transaction.
c) Customer Experience: PropTech has improved customer experience by providing personalized services and customized solutions. Platforms such as NestAway and NoBroker offer tailored solutions to renters and homeowners, making it easier for them to manage their properties. For example, one may provide the information of its property in NestAway and the same information may be useful for a person looking to rent a house for periodical stays. NestAway will not just connect the owner and tenant but will also be responsible for managing the house by supervising online payments, repairs and maintenance on additional charges.
d) Cost Savings: PropTech has been able to come up with cost effective solutions for both buyers and sellers. Online platforms have reduced the need for intermediaries such as brokers, thereby substantially reducing transaction costs for buyers and sellers.
e) Property Search: PropTech innovations in India has made it substantially easy, accessible, and convenient for buyers and sellers, to interact and search for suitable property. We have come far ahead from the time when buyers, brokers, sellers, and developers had to physically interact with each other to transact. For example, a startup called Zillow announced its new technology of their 3D Home tool which allows the real estate agents show immersive views of the homes to be constructed in the future for sale.
f) Investment: PropTech has effectively helped in making investment in real estate a more accessible process, with Crowdfunding platforms enabling the individuals interested in investing in real estate, do the same with as little as INR 10,000, with no upper cap. Platforms such asOctober and Exporo allow a pool of investors to either invest in real estate properties and gain an equity stake in it or lend the project some finances and get return on investment in some periods.
g) Property Management: Upcoming PropTech start-ups along with industry players like MagicBricks, 99Acres, Zolo, etc., have also started providing property management solutions to people interested in the same, making the process more efficient by automating various processes like collection of rent, maintenance dues, refund of security deposits, or handling other such responsibilities that may contribute towards effective property management.
h) Financing: The recent PropTech solutions have made financing of real estate development projects more accessible to individuals and small businesses because FinTech companies have started offering loans to individuals and businesses based on their credit history and credit worthiness.
However, the most significant area of PropTech in India is real estate analytics. Real estate analytics primarily means perusing the available data and statistical analysis pertaining to specific real estate, as required, to provide in depth details of growth and development in the real estate market. It can help property investors and developers alike, in making an informed decision by providing them with information on market trends, pricing, and demand. Real estate analytics is also used to predict future trends and identify potential investment opportunities. Real estate analytics firms use big data, ML, and AI to help their clientele in identifying new investment opportunities, forecast market trends, and optimize property performance. For example, real estate investors can use these analytics reports to evaluate the potential Return on Investment (“ROI”) of a property, while property managers can use analytics to identify ways to reduce costs and improve tenant satisfaction. Some of the leading real estate analytics firms in India include PropEquity, Square Yards, and Anarock.
Challenges to PropTech in India
The Indian real estate industry is ready for technological advancements for its growth, and PropTech has the much-needed potential to revolutionize the way properties are transacted or managed in India. However, there are various challenges that the industry is currently at loggerheads with, inasmuch that the same are hindering the growth and adoption of PropTech.
Firstly, the biggest roadblock faced by PropTech in India is the absence of proper digital infrastructure and connectivity in various parts of the country. According to a report by theKANTAR, despite the technological advancements and various government initiatives being brought into effect, only 43% of the population has access to internet, with internet speed being extremely slow and unreliable in many areas across the country. This particular roadblock acts as a massive hindrance for PropTech companies to reach potential customers and simultaneously, for customers to access the services being rendered by these PropTech companies.
Secondly, the next challenge being faced by the real estate industry, and more so the PropTech industry, is the slow pace of regulatory reforms in the real estate sector, and the lackadaisical attitude of the government towards bringing effective reforms in place to address the concerns of the PropTech sector, and the general public in large. Although the government has taken steps to simplify and streamline the approval process for real estate projects, due to the lack of proper infrastructure and cooperation between the Central and state Governments, there is still a lack of clarity and transparency in many areas. For example, the ownership of properties is often disputed, and the process of transferring property titles is complex and time-consuming. Additionally it is noteworthy to mention that many state Governments would prefer to proceed with an ideology different from that of the Central Government, due to difference in the ruling parties at the various levels of governance in the country. In the end, these internal conflicts only act as a hindrance towards the overall growth and development of the real estate sector, and incrementally, the PropTech sector. These issues make it difficult for PropTech companies to offer reliable and accurate services, such as property valuations and title searches.
Thirdly, cultural resistance to change, advancement, and development in the real estate sector is also a major challenge to the growth of PropTech industry. The real estate industry originally relied and functioned on face-to-face interactions and personal relationships between various parties. Now, many essential stakeholders are reluctant to adopt new technologies that may disrupt this traditional methodology in any manner whatsoever. Additionally, these persons have a perception that technological solutions are expensive, complex, and require skillset that they believe that they lack, which further dissuades the adoption of PropTech by general public at large. This ideology is primarily due to the firm belief of the population at large that given the lack of digital infrastructure in place, there may be a possibility that utilizing technology for transactions pertaining to real estate might adversely impact their financial strength, owing to the steep rise in fraud and cheating cases through technology. In furtherance to the same, a majority of the Indian population believes in, or prefers to transact in, liquid cash, in all matters pertaining to the real estate industry, thereby, unknowingly, acting as a hindrance to the advancement of PropTech in India.
Legislative and Statutory Framework for PropTech Growth in India
To ensure that the PropTech environment in India thrives and is actually able to reach its full potential, the following changes may be considered to be of priority:
1. Encouraging digital transactions and corroboration of information.
2. Smooth and easy transfer of real estate property by one person to another, or a developer to a buyer, as the case may be.
3. Cybersecurity of and for the masses.
The Indian government along with the Reserve Bank of India (“RBI”), has brought in effect various statutes and guidelines that have actually helped in strengthening the overall digital climate in India. The regulation of digitally enabling payment mechanisms started with the passing of Guidelines for Licensing of Payment Banks (Licensing Guidelines) in 2014, and thereafter, the passing of Operating Guidelines for Payment Banks in 2016, clarified RBI’s intent to bring these entities within the ambit of its control, and further, provide a sense of security to the general public at large, in doing so. RBI has been in process of passing such guidelines and directives over the period of time, while also ensuring that the process is ultimately streamlined, and easily accessible. By implementing the Online Dispute Resolution (ODR) System for Digital Payments in 2020, the RBI further showcased that along with ensuring growth of technologically enabled payment systems in India, RBI has also put in place mechanism in place to effectively tackle any and all disputes pertaining to transactions through these platforms. The COVID-19 pandemic further propelled the Indian government to promulgate such statutes that have actually increased the ease of doing business in India. Due to lockdowns and the ensuing social distancing, digital transactions became the primary means of carrying out transactions, and the framework put in place by the RBI, as the primary regulator, further garnered faith of the masses to and security to engage in digital transactions through payment aggregator solutions like PayTM, BhimUPI, BharatPe, etc.
However, the same cannot be said for the real estate sector. The general public at large still prefers to transact in cash and is still not comfortable with digitally transacting with a real estate seller given the quantum of financial resources in question, especially when it comes to transacting for an amount which may very well amount to the person’s lifelong savings. Despite bringing into effect guidelines to regulate failed transactions, or to encourage online dispute resolution, to the extent of making payment aggregators and Banking institutions accountable to the general public, the much-needed comfort zone has not yet been obtained to enable transactions of large quantum to take place over digital platforms. Furthermore, most of the digital payment solutions have an upper limit capping and as such, transacting the amount equivalent to the purchase price of a real estate property is seemingly not possible in the present scenario. In view of the above, it is safe to assume that the Indian government and the RBI need to bring into effect much needed regulatory changes to create an enabling environment to ensure transactions of high quantum can easily take place.
The Central Government notified the Real Estate (Regulation and Development) Act, 2016 and its associated Rules, to ensure timely deliverance of promises by a real estate developer. However, this Act only ensures that development of real estate takes place within the timelines as stipulated by the developers but has not dealt with the actual transfer of properties by a person to another. To this date, transfer of property is governed by the Transfer of Property Act 1882, the Stamp Act 1899, and the Registration Act 1908, along with their respective state amendments. The process of transfer of property has historically been a very rigorous and cumbersome which is still infected with too many intermediaries and ineffective laws and regulations. A proper revisit to these statutes is required to streamline the process of transfer of property by one party to the other. The notification of Model Tenancy Act 2021 by the Central Government may be termed as a humble attempt to streamline the issues being faced by the people involved in rental or leasing of property. This Act provides the framework of setting up appropriate dispute resolution forums, as well as the procedure to be followed between the transacting parties. While the Act deals with this particular aspect in the real estate sector, unless the infrastructure setup, as stipulated in the statute, is not put in place effectively, the desired outcome will not be achieved.
It is the technological need of the hour for the Central Government to rejig and amend the Information & Technology Act 2000, along with other relevant statutes to capture and deal with the increasing cyber-crimes in the Indian atmosphere. It is also a critical requirement to put in place a digital infrastructure which can not only withstand cyberattacks, but also be able to proactively tackle the same. This dual pronged approach shall help in establishing the precedent that the Indian technological infrastructure is robust and can withstand any threats pertaining to the cybersecurity of the people as well as the nation. It will further help in developing a sense of ease amongst the general public at large, and also push forth its utilization, as and when required. A strong cyber/technological infrastructure shall also ensure the availability of accurate and reliable data with respect to the real estate in India, which is crucial for the growth of PropTech in India. The government should create a centralized database of property information, including land records, building plans, and ownership details, and make it accessible to stakeholders in the industry. To tackle this challenge, the Central Government, in 2023, proposed the concept of Digital India Act 2023, which will be in line with the international standards and shall be at par with the international standards, in all aspects. This statute shall replace the Information & Technology Act 2000, however, the same still remains to be notified and formally notified by the Central Government. Till such time, the Information Technology Act 2000 governs the technology sector and as such, the challenges shall continue to remain in place. The central government and state governments have already put the Real Estate Regulatory Authority (“RERA”) in place and most of the above-mentioned data has already been migrated to the online RERA portals. The central government or the state governments may direct the concerned RERA to further store or migrate any data or information that may not be present, by means of appropriate guidelines or directions.
The Central Government has, vide the Startup India initiative, been able to encourage innovation and growth in startups across India, and has also assisted in providing an enabling environment to the startups. To ensure the growth of PropTech in India, the Indian government could offer targeted tax incentives, reliefs and other benefits, from time to time. An enabling digital infrastructure with favorable statutes and guidelines may be put in place to further push the growth of PropTech in India. Since PropTech is still in its nascent stage in India, the Central Government can further experiment its policies and guidelines to figure out as to how to assist the growth of this sector in India. This could help promote the development of new technologies and solutions that could benefit the industry, and ultimately the nation at large. It can be easily surmised that there is an urgent need for a comprehensive regulatory framework that can support the growth of PropTech in India while ensuring the protection of stakeholders’ interests.
Opportunities for PropTech in India
The real estate industry in India has seen an overflow in demand over the last decade, with the rise of working middle class, rapid urbanization, and enabling environment created by the government through various initiatives such as the Smart Cities Mission. This has resulted in an overall increment in real estate transactions and the requirement of efficient and transparent processes, more specifically when dealing with real estate transactions. One area where PropTech can contribute significantly and effectively in India is the domain of efficient property management. The Indian market has seen a rise of co-living spaces and rental homes, and as such, PropTech can potentially offer solutions such as property management software, smart locks, and IoT devices to simplify the management of properties.
Another area where PropTech can make a significant impact is the entire process of acquiring or purchasing real estate property by a person. Noteworthy PropTech startups which have already ventured in this domain include Square Yards and NoBroker, by offering online real estate marketplaces and virtual tours of real estate properties to potential clientele and providing responses to queries that may be raised by potential purchasers at any point in time. These startups have leveraged technology to provide a seamless home-buying experience to customers. PropTech can also achieve this objective by streamlining the construction process through utilization of 3D printing and Augmented Reality (“AR”) technologies. It is noteworthy that these technologies have already made a substantial contribution and impact in the medical industry and the gaming industry. Utilization of technologies like 3D printing and AR modeling will help in substantial reduction of construction time and costs, while also improving the quality and safety standards normally followed by the players in real estate industry. Startups such as 3Dexter and StrataEnviro are already offering 3D printing solutions for construction, to seamlessly achieve this objective and streamline the process followed by a real estate developer, in the industry.
It is significant to note that with the growth of an industry comes the opportunity to invest and fund the same, over the period of time, and when the opportunity so presents itself. With respect to the PropTech sector, it is critical to note that the most prominent area of investment in Indian PropTech, is the online real estate marketplace available to the general public at large. These online real estate market platforms, being a fundamental contributor to the Indian PropTech sector, allow buyers and sellers to interact, connect and transact online, reducing the need for physical visits while simultaneously increasing convenience. This has also enabled the resolution of critical queries of the real estate buyers and sellers while significantly removing the need to pursue various leads at the same time. Major Industry players like Housing.com, PropTiger, and MagicBricks have received significant funding from investors, given the uniqueness and genuineness of services that these players deliver, seamlessly, at the national level.
Another domain noteworthy of investment, in the Indian PropTech industry is the property management solution that is usually offered as a service, to persons having ownership or managerial rights over specific real estate properties. These solutions not only help property owners and managers streamline their operations and improve efficiency, but also assist in timely compliance with statutory requirements and mandates, as may be put in place by the Indian government, from time to time. Industry players like NoBroker, Zolo, and NestAway have raised significant funding owing to the specific provision of these services. Many PropTech players have also started providing services pertaining to legal due diligence of properties put up on their platform, thereby further reducing the overall expense incurred by a person during the process of acquiring a property, as and when required. Recently, there has been further traction towards PropTech players providing services pertaining to and related to construction and development. Many PropTech startups like BuildSupply, Infra.Market, and Brick&Bolt are developing appropriate solutions to further delve in this domain and also significantly contribute towards the improvement of construction process, while simultaneously making the entire process, all the more efficient.
The future development and growth of PropTech in India looks nothing but promising. The COVID-19 pandemic has accelerated the adoption of PropTech in the real estate industry, with buyers and sellers increasingly relying on online platforms to interact and transact with real estate industry specific inventories. Some of the trends that are expected to shape the future of PropTech in India include AI, Virtual Reality (“VR”), Blockchain and IoT. AI-powered platforms can help buyers and sellers make more informed decisions by providing personalized recommendations based on their preferences. VR is also expected to transform the way the general public look at the process of acquiring or selling property in the Indian real estate market, by providing services like immersive virtual tours of properties, along with significant features, enabling buyers to experience the property before making a purchase by doing so. At the same time, the Web 3.0 powered blockchain technology is also expected to improve the overall transparency and security that is supposed to be provided during a real estate property transaction. Blockchain-powered platforms can provide tamper-proof records of property transactions, reducing the risk of fraud and disputes. Furthermore, IoT is also expected to significantly transform the overall process of property management in India. IoT-powered platforms can enable persons to effectively manage their properties remotely, reducing the overall need and requirement of any physical inspections, while also ensuring that all statutory compliances and dues are taken care of, as and when required.
Having seen the challenges that are presently being faced by the Indian PropTech industry, it is safe to assume that even though an enabling environment is yet to be provided to the industry to grow, however, the potential for PropTech in India is still immense, and the same is yet to be explored to its extent. The sector has attracted, and is still attracting increasing investment across the world, and there are a growing number of startups offering innovative solutions to real estate challenges. With the right regulatory environment and support from the statutory bodies, PropTech has the potential to transform the Indian real estate sector and create significant value for its stakeholders as well as all the persons involved in the real estate sector or the PropTech sector, over the period of time.
The views expressed by the authors are personal.
About the Authors
Mr. Satyanshu is presently working as Legal Officer with SabPaisa, a FinTech Startup and RBI approved Payment Aggregator, with post qualification experience of approximately 9 years.
Ms. Kopal Kesarwani is a fourth year law student at O.P. Jindal Global University. She is also an Associate Editor at IJPIEL.
Managing Editor: Naman Anand
Editors-in-Chief: Jhalak Srivastav and Muskaan Singh
Senior Editor: Pushpit Singh
Associate Editor: Kopal Kesarwani
Junior Editor: Ishaan Sharma
Preferred Method of Citation
Satyanshu and Kopal Kesarwani, “PropTech in India: Stepping Stones for a Simplified Real Estate Sector” (IJPIEL, 12 April 2023)