Loan, sweet loan: Financial services is NoBroker’s fastest-growing business

NoBroker, the Tiger Global-backed prop-tech startup, sees a burgeoning opportunity in its home loans and insurance vertical as more younger consumers look to invest in houses, a top executive told Mint.

The Bengaluru-based company gets a fourth of its over ₹600 crore revenue from financial services and expects its home loans vertical to become its second-biggest business in the coming years, trailing its main real estate buying-and-selling business, said Saurabh Garg, co-founder and chief business officer at NoBroker.

“The number of houses we are selling every month is increasing. At the same time, our attach rate is also increasing. I believe home loans have the potential to become very large,” Garg said, noting that the vertical is already its fastest growing business. The attach rate reflects demand growth for a secondary product (home loans) because of demand for a primary product (homes).

NoBroker's home loans vertical grew threefold in FY24, the company said, declining to reveal numbers.

The executive expects the home-buying cycle in the country to pick up well in the next 4-5 years, further driving the need for easy financing options.

He said the real estate sector moves in cycles and after almost a decade of slow growth it has entered the fast-growth stage. There is genuine demand from buyers and interest rates are expected to come down, he said. 

Moreover, as average rent inflation in India outpaces annual salary increments and creates challenges for tenants, home-purchasing decisions are looking up, according to Garg.

There was a 23% rise in homebuyers aged 25-35 at the online property marketplace in the first half of 2024 from a year earlier. These buyers were primarily employed in the private sector and were part of a nuclear family, Garg told Mint.

More than half of the homebuyers on NoBroker were under the age of 45.

Also Read | How millennials can use these financial hacks to buy their first home

“They don’t see property ownership as the biggest milestone but as a means of building wealth and to establish stability early on in life,” he added.

Founded in 2014 by Amit Kumar Agarwal, Akhil Gupta, and Saurabh Garg, NoBroker entered the coveted unicorn club in November 2021 after raising $210 million in Series E funding from General Atlantic, Tiger Global Management, and Moore Strategic Ventures, becoming the first realty startup to bag a valuation upwards of $1 billion.

The startup said it has raised $366 million in funding till date. Its main competitors include another Tiger Global portfolio company MyGate and real estate service group Anarock’s Apna Complex.

Diversifying revenue

According to Garg, the need to facilitate easy home loan options arose two years ago when buyers struggled to close deals because of issues including poor knowledge of home financing alternatives.

“Home loans and other financial services are still not fully organised. We noticed that a lot of our customers were either not sanctioned loans fast enough or they just did not know the best suited player for their needs,” Garg explained.

Through partnerships with banks and NBFCs, NoBroker presents users with financing options after preliminary checks of income proof and credit scores. The startup takes a cut from the bank for every processed transaction. NoBroker has tied up with Indian Bank, State Bank of India, HDFC, Bajaj Finserv and Kotak Mahindra Bank, among others.

Also Read | Land purchases, joint development deals soar amid booming real estate demand

However, hypergrowth isn’t guaranteed. Banks and NBFCs already have a large customer base and sizable loan books, and small players that have partnerships with banks can only add so much value, according to a late-stage investor who spoke on condition of anonymity.

“It’s a good way to diversify revenue streams especially because real estate buying and selling trends can be cyclical. It’s typically a thin-margin business, but we’ll have to see how much this can grow,” this person added.

To be sure, other startups including Magicbricks and 99acres also offer similar services.

However, Garg said the idea is to keep building new products to capitalise on business opportunities. NoBroker is currently running multiple experiments, including facilitating short-term financing options for down payments on homes and insurance for homeowners to make rented property free of security deposit for tenants, Garg said.

“We are constantly experimenting with new ideas. Once we figure out what works best, it usually takes four to five months to roll it out on a larger scale,” Garg said.

Also Read | Should you choose a home loan that lets you cut interest payments using surplus cash?

The firm’s operating revenue grew 87% to ₹609 crore in FY23, while losses widened to ₹506 crore as new product launches and expansion of services to more cities led to higher expenses, Garg said.

While the company is yet to file its FY24 numbers, Garg said, without divulging specifics, that it managed to curb losses and post a 50% rise in revenue during the year.