HNIs invest in real estate startups, hoping for higher returns
17 Aug 2016
3 Min Read
Editorial Team
With a hope that fast growth will lead to high returns, high net-worth individuals (HNIs) are increasingly investing in real estate startups. Property Share, NoBroker, home rental and aggregator Zenify, co-working spaces firm Wired Hub and home rental platform NestAway are some of the startups that have received funding from HNIs or are in the process of doing so.
Kunal Moktan Founder, Property Share, reportedly mentioned that HNIs are flocking to real estate startups in part because the sector is easier to understand than SaaS (software-as-a-service), consumer technology, etc. He further added that startup investing offers HNIs a way to diversify their investments away from traditional avenues like fixed deposits, equity and gold. Property Share is currently speaking to several HNIs who have shown interest in investing in the company.
According to industry executives, HNIs usually take 2-5 per cent stake at the seed stage, with investments varying between $25,000 and $100,000 (about Rs 1,767 lakh). Further, HNIs fall into three broad categories 鈥� professionals who have done well in their respective fields, businessmen who have built small and medium businesses, and founders of other startups who are either successfully running their companies or have sold the firms. HNIs are comfortable with real estate considering that most of them have been investing in the sector for the long haul, as reported according to executives, adding that this gives HNIs a better handle on valuation and possibilities of scaling up, among others. Furthermore, according to experts, HNIs have started investing in real estate startups instead of buying property because of the slowdown in the sector, which has also prompted them to exit their investments wherever possible.
A report by property consultant Knight Frank India shows that launches of new projects fell 9 per cent year-on-year during the six months to June 30 to less than 107,120 units, the lowest in three years, as developers in the country鈥檚 top-eight cities turned cautious. According to the report, of the eight cities, NCR saw the sharpest fall at 41 per cent, followed by Chennai at 36 per cent and Pune at 32 per cent.
While Bengaluru-based home aggregator and rental management startup Zenify raised $1 million in a pre-series 鈥� a funding from HNIs, who have a minor stake in the company, home rental start up NestAway has investment from etailer Flipkart鈥檚 former head of operations Sujeet Kumar. CEO Sudarshan Purohit reportedly said that the company will use the funds to enhance its technology and analytic capabilities, along with entering new markets such as Mumbai and Delhi, as reported. NestAway manages 2,000 rental properties in Bengaluru, 40 per cent of which belong to NRIs.
Also, Bengaluru-headquartered NoBroker is in talks with HNIs to invest in the company. Akhil Gupta, chief technical officer, NoBroker.com, reportedly shared, that startups typically offer HNIs a low-risk investment opportunity with a multiple time upside. So, broadly it is a safe place to park their investments. He added that the company is seeing many HNIs from Silicon Valley who are willing to invest in Indian real estate startups.
With a hope that fast growth will lead to high returns, high net-worth individuals (HNIs) are increasingly investing in real estate startups. Property Share, NoBroker, home rental and aggregator Zenify, co-working spaces firm Wired Hub and home rental platform NestAway are some of the startups that have received funding from HNIs or are in the process of doing so.
Kunal Moktan Founder, Property Share, reportedly mentioned that HNIs are flocking to real estate startups in part because the sector is easier to understand than SaaS (software-as-a-service), consumer technology, etc. He further added that startup investing offers HNIs a way to diversify their investments away from traditional avenues like fixed deposits, equity and gold. Property Share is currently speaking to several HNIs who have shown interest in investing in the company.
According to industry executives, HNIs usually take 2-5 per cent stake at the seed stage, with investments varying between $25,000 and $100,000 (about Rs 1,767 lakh). Further, HNIs fall into three broad categories 鈥� professionals who have done well in their respective fields, businessmen who have built small and medium businesses, and founders of other startups who are either successfully running their companies or have sold the firms. HNIs are comfortable with real estate considering that most of them have been investing in the sector for the long haul, as reported according to executives, adding that this gives HNIs a better handle on valuation and possibilities of scaling up, among others. Furthermore, according to experts, HNIs have started investing in real estate startups instead of buying property because of the slowdown in the sector, which has also prompted them to exit their investments wherever possible.
A report by property consultant Knight Frank India shows that launches of new projects fell 9 per cent year-on-year during the six months to June 30 to less than 107,120 units, the lowest in three years, as developers in the country鈥檚 top-eight cities turned cautious. According to the report, of the eight cities, NCR saw the sharpest fall at 41 per cent, followed by Chennai at 36 per cent and Pune at 32 per cent.
While Bengaluru-based home aggregator and rental management startup Zenify raised $1 million in a pre-series 鈥� a funding from HNIs, who have a minor stake in the company, home rental start up NestAway has investment from etailer Flipkart鈥檚 former head of operations Sujeet Kumar. CEO Sudarshan Purohit reportedly said that the company will use the funds to enhance its technology and analytic capabilities, along with entering new markets such as Mumbai and Delhi, as reported. NestAway manages 2,000 rental properties in Bengaluru, 40 per cent of which belong to NRIs.
Also, Bengaluru-headquartered NoBroker is in talks with HNIs to invest in the company. Akhil Gupta, chief technical officer, NoBroker.com, reportedly shared, that startups typically offer HNIs a low-risk investment opportunity with a multiple time upside. So, broadly it is a safe place to park their investments. He added that the company is seeing many HNIs from Silicon Valley who are willing to invest in Indian real estate startups.
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