How NoBroker is locking down on a fee model to become profitable

The pitfall of excessive cash burn and rapid expansion of several digital real estate developers has led late entrant NoBroker Technologies Solutions to crack the revenue model in the rental space as a priority, before pressing expansion and diversifying into home-buying category.

Founder Akhil Gupta of NoBroker, says the company, which raised $13m in two round of equity funding, has prioritised monetisation before market expansion and has been investing in the product development in the last one year.

Having figured out a revenue model, the company, which has been running as free business for the last two years, is planning to expand to 10-12 cities in the next 18 months, he said. Last week, it raised an undisclosed amount of investment from Paytm founder Vijay Shekhar Sharma.

Gupta said the company, at present, catering to Mumbai, Pune and Bengaluru, has developed a freemium model with more than one revenue streams, some of which are in the pilot stage. The company may not tap the investors to fund the expansion and plans a third round after breaking-even in 18 months.

It plans to roll-out in NCR, Hyderabad, Ahmedabad, Kolkata in the first phase of the launch expected to start in 1-2 months.

The concept of starting a real estate portal without brokers came from personal bad experiences of the founders with brokers. The broker begins with showing the worst and non-moving flats in the given rental range which do not fit the requirement, which is a waste of time, said Gupta. There is a clear market requirement and a problem that needs to be addressed.

Revenue Streams

The website is adding one lakh customers on a monthly basis and witnessing six lakh customer connections every month which leads to a saving of more than 20 crores through brokerages, he added. It has a close rate of 15% for the customers and expects to increase it to 45%.

Customers use the site to find verified houses and can contact up to nine owners for free, beyond that the company charges between Rs 999 to Rs 5,999 through three plans, including assigning a relationship manager, he added. At present, 10% of the 6,000 transacting customers through the website use a paid service.

Besides, the company earns a referral fee through partnership with packers & movers and furniture rental company Furlenco for passing qualified leads, where the customer can make third-party payment through the website for additional discount, he added. It also gets 90-95% of the revenue through the subscription plans. On an average, the customer, who finds a house through the website, pays an average rental of Rs 25,000 in Mumbai, Rs 19,000 in Bengaluru and Chennai.

Another revenue stream includes creation of a platform, which will enroll rental properties and pay rent to the owners. The website would take care of occupancy and other procedures, he added.

Funding

In September, Facebook director Anand Chandrasekaran also invested in NoBroker.com.

The company, which raised its Series B funding in February this year, has raised nearly $13 million in funding so far. Other investors in the firm include SAIF Partners, Singapore-based venture capital firm BEENEXT, Digital Garage (an early investor in Twitter), BEENOS, Qualgro and Mamoru Taniya of Asuka holdings.

NoBroker was founded in 2013 by IIT alumni Gupta, Amit Agarwal and Saurabh Garg. Gupta was an application engineer at Oracle and technical lead at PeopleFluent, which provides Software-as-a-Service talent management solutions. Agarwal was an analyst with Cognizant, principal consultant at PwC and associate director at Australia and New Zealand Banking Group, while Garg is co-founder of Four Fountains De-stress Spa.

Do competitors have a similar revenue model?

Several online platforms for brokerage-free rental listing including Grabhouse.com, Zocalo.in and Nestaway Technologies have attracted investor attention in the last one year.  Rental startup Grabhouse, which got acquired by Quikr, enrolls house to be rented to individuals on bed basis promising higher rent and transfers monthly rent through the website.

Housing , the four-year-old startup started off as a disrupter of India's opaque residential rental industry, had to scale down its operations and prune its workforce in the past many months following a series of troubles that led to exit of its co-founder and CEO Rahul Yadav and put SoftBank in a spot.  The company now is establishing itself as one-stop destination for home buyers, closing down its rental segment.

The digital real estate segment in India is dominated by companies such as MagicBricks, 99acres. Housing, PropTiger and QuikrHomes. News Corp, which holds a significant stake in PropTiger, also owns Mosaic Media Ventures, the parent of this website.

MagicBricks, owned by Times Internet Ltd (TIL), has scrapped its plans to raise $100 million from external sources for its realty portal as the action in the digital real estate sector, which peaked early last year, had dissipated.