Private equity investments: PE inflows into proptech firms rise to USD 741 mn in 2021: Report

Private equity investments in proptech firms rose 35 per cent to USD 741 million last year as investors sought to tap huge opportunities amid rising use of technology in the realty sector, Housing.Com said. Proptech firms that are providing solution in sales and marketing, and construction management got 69 per cent of the total funds.

Inflow of funds into proptech firms stood at USD 551 million in 2020.

Between 2009 and 2021, the proptech players in India received a total of USD 3.2 billion Private Equity(PE) investments.

In the total investment figure, Australia's REA group-owned Housing.Com has included 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.

PE investments in proptech firms have been growing at a CAGR (Compound Annual Growth Rate) of 55 per cent since 2010, according to the 'PropTech India Monitor 2022' report by Housing.Com, which is part of REA India that also owns PropTiger.Com and Makaan.Com.

The report said the average deal size of PE 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," Dhruv Agarwala, Group CEO at Housing.Com, said.

The adoption of new age technologies such as artificial intelligence and machine learning, virtual and augmented reality, and blockchain has opened up new opportunities for startups in proptech, he noted.

"We believe that proptech in India will continue to grow, with the future being anchored around key aspects such as efficiency, scalability, data-backed decision making and sustainability. The adoption of technology will empower all stakeholders as firms will scale at a much faster rate, improve consumer experience, bring in much-needed transparency, and aid in speedier decision making," Agarwala said.

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

Housing.Com report revealed that tech firms doing sales and 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 2020.

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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 and marketing firms jumped three 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 the year-ago period.

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 the previous year.

Housing.Com attributed the fall in investments in this category to the adverse impact of the COVID 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 said.

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, while the furniture rentals segment's share in total investments dipped to 3 per cent from 13 per cent during the period under review.

"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," Ankita Sood, Head of Research at Housing.Com, said.

She expects that the PE inflows to rise significantly in the next five years in proptech space.

In November last year, Bengaluru-based NoBroker.Com raised USD 210 million from investors at USD 1 billion valuation to become the first unicorn in the proptech sector.