NoBroker, a peer-to-peer property listings startup that wants to rid brokers from the rental process in India, has closed a $3 million Series A round to expand its service to more cities��beyond Bombay and Bangalore.
The Bangalore-based startup wants to simplify the process of renting properties. It believes that a peer-to-peer model, facilitated by its site, can slice out property brokers — the kingpins who control rental deals and take a large slice of commission for matching landlord and tenant.
While it is true to say that the internet has become an important way for tenants to find new leases more easily, NoBroker co-founder and CEO Amit Agarwal believes that it doesn’t yet go far enough.
Keeping The Pound Of Flesh
“We feel that a peer-to-peer chain has to happen,” Agarwal, formerly with PWC and ANZ Bank, told TechCrunch in an interview. “[Online property sites] have become a sort of advertising portal for brokers… yes, you can find properties on your own, but you still have to pay the broker, he will take his pound of flesh when you go there physically.”
Exactly how much are we talking about here?
Typically, Agarwal said, a broker can pocket 18 percent of the total of an annual rental agreement via charges to both the tenant and home-owner. He conservatively estimates that puts the total rental brokerage market at around $4 billion annually in India — and around $200 billion globally.
“No where in the entire world, and in no other industries, is there such a high charge set against a value-add that is very, very low,” he said.
It isn’t just about money. Agarwal recounted how he’s used brokers in the past and been taken to the worst properties first, as a broker tries to shift the least popular inventory first. Most care about closing a deal, not the right deal, he added.
No Brokers Allowed
In 2013, Agarwal and NoBroker co-founder and CTO Akhil Gupta reflected on their experiences renting in India and “realized that the fundamental point is to move away from brokers altogether.”
NoBroker, their solution, was born that year. In addition to listing properties for rental, they created an algorithm that Agarwal claimed can scour the internet to verify that each new sign-up is a prospective tenant and not a broker — many of whom tap into online rental sites to boost their business or grab new listings.
Agarwal declined to go into precise detail of how the algorithm works, but he claims it is “99.9 percent effective.”
“We’ve found that those few who do get in are caught by the community within an hour,” he added.
NoBroker began covering Bombay and recently expanded to Bangalore. In Bombay, Agarwal claimed, the company has 5,000 listed properties. That, he said, is more peer-based listings than even India’s top rental portals Housing.com, PropTiger and others — though these two have more overall (read broker-managed) listings at this point.
“There are around 100,000 flats in Bombay for rental at any given time, and maybe 8-10 percent are posted by owners. So we already have half of that marketshare,” he explained.
Making Things Easy
Rather than focusing on the big fish — Housing.com is backed by SoftBank, PropTiger counts News Corp as an investor — which also cover house sales and new developments, Agarwal said he believes that brokers are the startup’s main battle.
“Our competition is brokers, we need to give such ease of use to make [using NoBroker] as easy as using a broker,” he added.
Agarwal admitted that many people will use brokers because they are a safe option, particularly when it comes to legal documentation. For that reason, NoBroker provides users with a template to generate their own customized legal document for each rental. He claimed that even expatriated home-owners, for example those in the U.S., feel comfortable enough to use NoBroker over a broker, particularly when they can pocket significant cost savings doing so.
The NoBroker founders believe that their formula has the potential to work overseas, but, for now, they are focused on the Indian market. They will use the funding to expand the service’s presence. There’s no immediate goal, but Agarwal said he is aiming to reach 20 cities in India in the next two years — that target is likely to require further funding in due course, he admitted.