Private Equity investments in PropTech up 35% annually to USD 741 million in 2021

New Delhi: Private equity (PE) investments in proptech firms increased by 35 per cent during the last calendar year to a record USD 741 million, driven by increased adoption of technology in the real estate sector, according to the latest report by the country’s leading digital real estate firm Housing.com.

Research by the REA India owned leading full stack digital real estate platform Housing.com, found that the inflow of funds into proptech firms stood at USD 551 million in the 2020 calendar year. The proptech industry in India has received a total of USD 3.2 billion private funding between 2009 and 2021. 

Source: Venture Intelligence, Housing Research

The investments tracked include private equity, venture capital, debt, PIPE (Private investment in public entities), project level investments, and pre-IPO private equity deals, at the early, growth and late stage.

The annual report on the sector titled ‘PropTech India Monitor 2022’ by Housing.com, that is part of REA India, which also owns PropTiger.com and Makaan.com, stated that in India, private equity investments in proptech firms have been growing at a CAGR of 55 per cent since 2010.

The growing investor confidence has pushed the average deal size of private equity investments in proptech to an all-time high of USD 25 million in 2021. 

“The pandemic has definitely turned out to be a crucial turning point for the proptech space in India. Like many other sectors, real estate managed to leverage the digital acceleration witnessed during this period. The adoption of new age technologies such as artificial intelligence & machine learning, virtual & augmented reality and blockchain has opened-up new opportunities for startups in proptech,” said Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com.

As per their recent consumer survey, a significant 40 per cent of potential homebuyers are willing to buy a property completely online or after just one visit. 

Source: Venture Intelligence, Housing Research

As per our research, tech firms doing sales & marketing, and providing construction technology, garnered 69 per cent of the total USD 741 million investments received during the last calendar year. 

The share of construction technology firms in total PE investments increased to 36 per cent in 2021, from just 4 per cent in the year 2020). 

Proptech firms in sales and marketing got 33 per cent of the total PE investments last year as against 13 per cent share in the 2020 calendar year. Investments in tech-based sales & marketing firms grew 3 times in 2021 to USD 241 million from USD 70 million in the preceding year.

The share of proptech firms in co-working and co-living, in terms of investment received, fell to 14 per cent in 2021 from 36 per cent in 2020. The shared economy segment, comprising co-working and co-living operators saw a 47 per cent decline in fund inflow to USD 104 million in 2021 from USD 198 million in 2020. The fall in investments in this category is mainly due to the adverse impact of the COVID-19 pandemic. The several waves of infections and the consequent lockdowns, along with social distancing norms and work from home, resulted in plummeting demand for co-working and co-living spaces, the report pointed out. 

Similarly, the share of interior design services firms in the total PE inflow declined to 11 per cent in 2021 from 32 per cent in 2020. The furniture rentals segment’s share in total investments dipped to 3 per cent from 13 per cent during the period under review. 

The investments tracked by Housing.com include private equity, venture capital, debt, PIPE (Private investment in public entities), project level investments, and pre-IPO private equity deals, at the early, growth and late stage.

“The latest trends show that while proptech segments such as sales & marketing continue to garner investor interest, private equity inflow has significantly picked up in construction technology amidst the rise in input costs, as digitisation aids in achieving greater efficiency and increases cost savings. We see the next 5 years bringing in sizeable investments in the modernisation of the real estate sector across segments”, said Ankita Sood, Head of Research at Housing.com.