Why Fewer New Proptech Startups Are Launching Now

Challenges and Future Prospects for Proptech Startups in India

By Team Dlanes

The number of new proptech startups has been falling since 2020, with the biggest drop happening in 2022 by 58%.

In Bengaluru, two years after the COVID-19 pandemic started, the real estate sector saw a big boom due to lots of demand. This helped traditional real estate players like developers and agents. However, proptech startups, which use technology to improve real estate services, didn’t benefit as much.

Data from Tracxn, a company that tracks market data, shows that the number of new proptech startups in India kept decreasing from 2019 to 2023. There were 390 new companies in 2019, but only 53 in 2023. This suggests that investors are more cautious about putting money into proptech compared to other areas like edtech or fintech.

Dr. Nikhil Sikri from ZoloStays mentioned that the interest from entrepreneurs and investors in proptech is low because not many proptech companies have shown fast growth. This issue got worse with COVID-19.

Tracxn’s Co-Founder, Neha Singh, mentioned that the drop in 2022 matches a bigger trend where less money was put into startups. In 2021, investments reached $35 billion but then decreased.

Before COVID-19, proptech was very popular. For example, NoBroker, Infra.Market, and Livspace all got big investments in 2019 and later became very successful.

The interest in proptech started to grow in 2012 with companies like OYO and Housing.com getting their first investments. However, the pandemic slowed down this momentum by delaying returns for investors and creating doubt about the sector.

Experts and people working in the field point out several reasons for the decrease in new proptech startups. One big issue is that the real estate sector in India has many structural problems that are hard to solve with technology alone. For example, information about real estate is often not transparent on purpose.

Land and property rules differ a lot in India because they are managed by state governments. This makes the market very fragmented and local, which benefits local brokers more.

Even though investors are still open to funding proptech startups, they are cautious because of the challenges in the sector. Changes in this area are slow, and there have not been many successful exits or big sales of proptech companies, which makes investors hesitant.

However, there’s still a big opportunity in smaller cities in India, and many believe that innovation in the sector can happen. But it might take a while, possibly five years, for a big breakthrough.

Dr. Sikri believes that once a few proptech companies go public, interest will increase again. Others think that simplifying real estate laws could help too.

Startups launched in India across various sectors from 2019 to 2023

Source: Tracxn

A positive note is that out of 1,000 proptech companies started in the last five years, 895 are still active.

( Credits: Zolostays, Tracxn , Deccan Herald )

Also read: Free Backlink Websites for Real Estate Businesses