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Grabhouse Wants to Make Renting a Flat Simple, by Cutting Out Brokers

Grabhouse Wants to Make Renting a Flat Simple, by Cutting Out Brokers

By Sriram Sharma | Updated: 9 November 2015 18:41 IST

Renting a house remains one of the most annoying necessities of life, and as we're all shunting around the country following jobs, it's not something that happens only once either. Many new companies are trying to break through the clutter, and Gadgets 360 met up with the founders of Grabhouse to get a better look at how it all works.

India's real-estate tech space has seen some high profile startups in terms of funding size, with a total investments sum of $303.7 million overall, according to data provided by startup tracker Tracxn. At the same time, there's a slump in India's real estate market, where a whopping 4 lakh crore of inventory lies piled up, with 7.5 lakh unsold homes, according to Propequity, an online subscription based real estate data and analytics platform.

Funding activity in the year 2014 amounted to $210.8 million (roughly Rs. 1398 crores) in nine rounds of funding, with huge rounds raised by Housing.com, Commonfloor, Indiahomes and Proptiger. In 2015, we've already seen investments of $42.9 million (roughly Rs. 284 crores) with 20 rounds of funding, with the largest funding rounds going to broker-free real-estate platforms like Nestaway, Grabhouse, NoBroker, and Flatchat.

Grabhouse - which launched in 2013 - recently secured $10 million (roughly Rs. 65 crores) in funding from existing investors Sequoia Capital and Kalaari Capital in October. The company is based on the premise of providing broker-free listings, connecting tenants to home owners, and it is one of the largest funded players in this space, with a team size of 400.

(Also Read: Seven Startups That'll Help You Find a House, Without a Broker)

At a recently organized hackathon in Koramangala, Bengaluru, Gadgets 360 met up with Grabhouse founders Prateek Shukla and Pankhuri Shrivastava, to get a view from the trenches.

"There was no transparency because of brokers, since they were working on commissions," says Shukla. "The kind of money you are spending on brokerage is not appropriate to the kind of value that you are getting out of it. And [despite] so much of competition, none of [the other real estate platforms] had gone past the discovery phase of the apartment hunting process."

For the first six months, Shukla and Shrivastava were a startup of two, and hired their first employee in January 2014. Grabhouse's monetization model is centred around a 'neighbourhood specialist'; a salaried employee of the startup, who is trained in providing assistance to all those people who are searching for a house and are new to the city. They help tenants finalise the house, and show them the houses available in an area. The role is similar to that of the broker, but the neighbourhood specialist isn't incentivised to find a house at the highest price, since he's not getting a commission but rather a fixed salary.

The specialists come from a customer relationship background, and are trained to cultivate relationships with owners and renters, "We maintain relationships with the owner as well, so that the next set of properties that are available from his peer group, they are referred to us."

Solving the broker-free model is a data optimisation problem, Shukla says. "When the real estate brokerage industry had started, it started like this - nine people are actually visiting the flat, and the 10th person finalises it," he explains. "In order to recover the entire cost, they need to charge one month as a brokerage. That can be easily optimised, if the appropriate person is shown the flat by listing all the need to know details of flat, the cost can be reduced." There's no broker pressuring you to close the deal on a house you don't like, as you work through the various filters and narrow down your search before ever reaching a property.

Grabhouse creates a 'persona' for every user who is searching for a house on their platform, and curates users. Only the users that it calculates have a 70 percent or higher probability of closing on a house are shown the property by a neighbourhood specialist.

Think of it as OkCupid, but for houses. "We are not sending those kinds of people who have a very specific demand. Because we are working in a broker-free environment, you obviously have reduced the number of properties that are available in the market," says Shukla. "People who have specific demands are going to have a bad experience. We are first focusing on people whom we can give maximum experience out of it."

What that means is that Grabhouse is geared towards a user base that is budget conscious, and doesn't have very high expectations. The typical customer is someone who is young, and really just looking for a room to crash in, preferably within a tiny radius of the workplace. A search for roommate and PG accommodations on the website yielded 2501 listings, while a search for flats yielded 1465 listings.

But personal experience with most broker-free platforms has shown that they don't always have the same quality of leads as a broker who has on-the-ground knowledge of a neighbourhood. Brokers also often provide logistical support when house-hunting, putting you in their car or on their bike, to show you half a dozen houses in a couple of hours. Grabhouse is hoping that the neighbourhood specialist can help counter this advantage. The company started hiring people for this role five months ago, and currently has 18 specialists in Bengaluru. It has also started the process to bring in neighbourhood specialists in Delhi, Shukla says.

Grabhouse is also working with transportation companies to crack this model. "Through 'virtual' neighbourhood specialists, you can browse properties online and create an automated itinerary. It also books a cab then and there itself, to take you to those kind of places which you have shortlisted," says Srivastava.

"We also have an app for neighbourhood specialists for lead management, which tells them how to prioritise the leads, the flats that need to be showed to them, and how you can change requirements on the fly," explains Shukla, saying most people don't tell their requirements at first. Most customers have vague parameters initially, and later start refining them later. "When they enter the first home, that's when they start detailing their specific requirements - like the master bedroom is too small, I wanted a balcony, modular kitchen. The app the specialists use dynamically changes as per the feedback from the renters when showing them properties. That's why the success rate is 70 percent."

That still means a 30 percent chance that you won't like any of the properties you see, and unlike a broker, visiting houses with Grabhouse isn't free - you've got to pay Rs. 999 for the trip. That's a big fee for a single day of house-hunting, but if it is as effective as Grabhouse claims, then you're looking at big savings at the end of the process.

We tried booking an appointment with a neighbourhood assistant to see what the experience was like, and the first issue we had was that the website doesn't have a specific module that lets you schedule a booking. Instead, you have to go through the call centre, but despite three requests and long (10 minute) waits while holding the line, it wasn't possible to get a response from a neighbourhood specialist.

A former colleague, Aditya Kshirsagar, also had some issues with Grabhouse, though the company did not charge him for it. Kshirsagar found Grabhouse via Facebook, but the flat he selected became unavailable less than 15 minutes after being contacted. He was then shown homes in a neighbourhood he had ruled out online, and the neighbourhood specialist did not meet him in person either, instead only sending locations of the homes via WhatsApp. "I had to coordinate with owners to see the houses with no visibility on what is going to be available," Kshirsagar says. It's clear that while the founders talk about focus on fulfillment, the ground reality is that there is still a lot of work to do.

Grabhouse plans to scale using an app that will serve as a virtual neighbourhood specialist. Shukla says that haven't finalized a pricing model for it yet. It will be on par with Cortana and Siri, he says, with voice support for support three languages - English, Kannada and Hindi. However, they didn't have a demo of the app to present, although Shukla says that they aiming for a tentative launch for the app by the end of the year.

Srivastava insists that Grabhouse will grow at a sustainable pace. Given that they have a very small number of actual neighborhood specialists, revenue potential seems to hinge heavily on its upcoming app, which made the lack of a demo even more surprising.

Nonetheless, Shukla says that it will be able to schedule the apartment visit, create an automated itinerary of the places you need to visit, so that a potential tenant can close the transaction quickly. For people who are really unaware of an area and really want assistance, on ground, real neighbourhood specialists are going to be available, he says.

The idea that Shukla and Srivastava have shared are very promising - the reality is harder to judge, as we weren't able to get a neighbourhood specialist, or see a demo of the app. Others have clearly had better experiences than us, and hopefully, Grabhouse will be able to reach its goals with the upcoming app. If that doesn't work out, then the company is going to face an uphill struggle in what is a crowded marketplace.

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