Is Government Policy and Capital Markets Impacting Real Estate Tech Fundraising in Emerging Markets?
For the better part of 2015, real estate tech investments were trending upward. Talks about a lower follow-on funds and down round in a bull market was unfathomable, especially when real estate and tech's global markets were outperforming estimates. However in 2015, the real estate tech sector went through an interest rate hike, policy change, and lower total capital invested in the sector, begging the question, "are we in a real estate tech bubble?"
CommonFloor, a residential real estate tech startup in India, was the first startup in 2015 to receive capital from investors less than its previous round. In 2014, the startup collectively raised a Series D and Series E, totaling $40.4 million (USD). However, in Q1 2015, the startup raised a Series F, totaling $15 million, a dramatic 63% decrease since 2014.
While the valuation of the startup is unknown, the lower follow-on fund for the real estate tech startup may not come as a surprise to real estate investors in India and global markets. Since 2014 and as recent as Q1 2015, lawmakers in India have been discussing revamping a version of a lapsed Benami Transaction Bill, which will impact concealing the identity of true buyers or sellers (developers), along with investing in real estate with untaxed income or unaccounted wealth, aka "Black Money," an illegal yet common demand from landlords and developers in India.
As the current market shifts, venture capital will dwindle and shrink valuations, especially in emerging and niche markets. Some tech investors expect down rounds to become more common place in emerging real estate tech markets in 2016, just as they do when there is a macro market correction.
A similar affect is also being felt in core real estate markets on the heels of U.S. interest rate increase. Learn More ›