The real estate boom is behind us

Quikr bet big on real estate, and now is a pretty bad time to be in it. India’s real estate industry is finding it hard to sell its inventory, and a large amount of inventory has been stacking up month on month. Experts blame the slowdown on demonetization—when the government declared 86% of India’s currency illegal in 2016—as well as falling return on investments in the real estate segment.

As per estimates released by real estate research firm PropEquity, more than 6 lakh residential and commercial units went unsold in the second quarter of 2018, while India’s IT capital Bengaluru witnessed a 28% drop in new projects, even as the city sits on unsold stock of 99,589 units.

Operating Multiplied Vertical

Yet Quikr seems to exist in a different reality. It claims to have tripled its monthly real estate revenue from Rs 5 crore ($673,000) in July 2017 to Rs 15 crore ($2 million) in July 2018 and that the vertical is profitable. Its closest competitor Olx, which operates multiple classifieds vertical is already profitable. In India, Olx reported a net profit of Rs 1.6 crore ($215,000) in FY15.

Ever since then, Olx has reported consequent profits, posing tough competition to Quikr. In FY16, Olx generated profits of Rs 6 crore ($808,000), and Rs 8 crore ($1 million) in FY17. However, Olx’s expenses are significantly lower than Quikr’s, considering that Olx spent just Rs 80 crore ($11 million) in FY17 to generate total revenues of Rs 92.5 crore ($12.5 million), just short of reaching the Rs 100 crore ($13.4 million) mark by a couple of crores.

As per Olx’s statement in March, its biggest vertical was the automobile business with over 15,000 cars being listed on sale every day.

On the other hand, Quikr spent a whopping Rs 403 crore ($54.2 million) to return total revenues of just Rs 109 crore ($14.6 million) in FY17, most of which came from advertising revenues. Quikr’s acquisition spree has cost it dearly in terms of revenues.

So, what’s driving the exponential growth that Quikr claims? The answer lies in the 13 companies that it has acquired, of which five are in real estate. According to data sourced from business information platform Paper.vc, Quikr’s biggest revenue channel is advertising.

In FY17, the company made (consolidated) advertising revenue of Rs 36 crore ($5 million). This has only increased since Quikr carved out a separate real estate vertical in September 2015. And Quikr’s acquisitions helped kickstart the improvement.

Quikr’s five real estate acquisitions were spurred on by one thing—competition. The company’s overall revenue—across real estate, classifieds, jobs, services, and a used items marketplace— in FY15 was Rs 25 crore ($3.3 million). Meanwhile, its biggest competitor in the online real estate space—99Acres—had already hit the Rs 100 crore ($13.4 million) mark the same year. It went big or go home time for Quikr. The company chose to go big. Over $300 million big.

Getting rapid results

Between November 2015 to Jan 2016, Quikr announced three real estate acquisitions back to back: IRX, RealtyCompass, and Commonfloor respectively. It wanted a quick breakthrough into the real estate market, and these acquisitions, according to several former and current employees, gave Quikr the swift growth it wanted. Even if it cost them a pretty penny.

Post the three acquisitions, the company’s revenue shot up. In FY16, Quikr posted revenues of Rs 41 crore ($5.5 million), up from just Rs 25 crore ($3.3 million) a year ago—a year-on-year growth of 64%. Encouraged by the results, HDFC Realty and HDFC RED were soon added to Quikr’s kitty.

Each of these properties was either merged internally or continued to operate independently under their original platforms. CommonFloor and RealtyCompass currently have their own landing page.

There are several reasons for this—brand visibility, strategy, reach, potential integration, among others. Quikr’s later acquisitions—HDFC Realty and HDFC RED—saw Quikr creating a completely new brokerage brand named Quikr Realty. The new entity is an amalgamation of the HDFC Realty and HDFCRED. Quickr paid $54.8 million for the new facelift. Grabhouse and Indian Realty Exchange were just integrated into QuikrHomes.