Challenges and Future Prospects for Proptech Startups in India

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    Two years after the COVID-19 pandemic hit, the Indian real estate market began to recover due to high demand, benefiting traditional real estate developers, brokers, and agents. However, one area that hasn’t taken advantage of this boom is real estate technology startups, known as proptech startups.

    Recent data shows a significant drop in the number of new proptech startups in India from 2019 to 2023. In 2019, there were 390 new companies, but by 2023, this number fell to just 53. This decline suggests that investors and venture capital firms are less interested in proptech compared to other areas like education technology (edtech) or financial technology (fintech).

    Dr. Nikhil Sikri, co-founder of ZoloStays, mentioned that the proptech sector is currently not very attractive to entrepreneurs and investors because it hasn’t shown significant growth. The situation worsened with the COVID-19 pandemic. In 2022, the sector saw its biggest yearly decline of 58%, mirroring a broader slowdown in startup investments. After reaching a high of $35 billion in investments in 2021, the funding environment cooled down significantly in 2022.

    Before the pandemic, proptech was very popular, with startups like NoBroker, Infra.Market, and Livspace attracting significant investments and eventually becoming very valuable companies, known as unicorns.

    The pandemic is seen as a major reason for the slow progress in the proptech sector, delaying investment returns and creating doubt among investors. Other factors include the complex and opaque nature of the Indian real estate market, with different laws in different places making it hard for new companies to grow on a large scale.

    Investors are cautious because they understand the challenges of the sector, including the difficulty of changing longstanding practices and the lack of clear exit strategies, such as selling the company or going public.

    Here’s a table summarizing the data on startups launched in India across various sectors from 2019 to 2023:

    YearProptechEdtechFintechHealthtech
    20193901,3559771,109
    20203662,6061,3051,682
    20212831,5421,508962
    2022118910687414
    202353407249135
    Source: Tracxn

    Despite these challenges, there is optimism for the future. With many cities in India still not fully explored by proptech, there’s a large opportunity for growth. Industry experts believe that significant improvements and possibly a few successful public offerings of proptech companies could reignite interest in the sector. Currently, out of 1,000 proptech companies started in the last five years, 895 are still active, showing that there is still potential for success in this area.

    (Credits: Dlanes)

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