Vietnam’s Proptech Market looks to find the right online – offline recipe for success

Propzy’s dissolution of a legal entity last month has raised several questions about the burgeoning proptech market in Vietnam, which is still dominated by the traditional brick – and – mortar real estate business.

Proptech startups in the country are struggling to find the right online – offline mix for their brokerage models as they realize that traditional factors such as pricing, location, design etc still play a more crucial role than technological factors.

Industry experts DealStreetAsia spoke to said proptech can help further develop the brokerage model in Vietnam, and identified property management, where efficiencies and cost saving are going to become critical, and data analysis, given the opaque nature of the Vietnamese market, as key areas where it can be used. 

“The key drivers of proptech in Vietnam are set to move beyond online brokerage models and will increasingly focus on efficiencies in property management, as well as the use and application of data in real estate decision making,” said Neil MacGregor, managing director of Savills Vietnam.

Propzy shifts model 

In June this year, DealStreetAsian broke the news about Softbank Ventures Asian-backed proptech startup Propzy laying off over 50% staff as the company scales down due to the pandemic and prepares to shift its business model. A week later, Propzy announced that it had dissolved its legal entity related to direct sales staff in Vietnam.

Propzy is understood to be moving away from its asset–light model, which focused on 

tech–enabled direct brokerage services, to services such as PropzyHOME – a townhouse supply platform developed by Propzy that is involved in the selection of land to re-designing it and selling to customers – and PropzySTAY, which provides home rental solutions.

According to Hieu Do, real estate managing director of VinaCapital, one of the largest investment management firms in Vietnam, the shift from an “asset light” service model to real estate investment and development will completely change the balance sheet structure and cash flow of any proptech firm.

Founded in 2016, Propzy describes itself as a “FIRE-tech” (financial, insurance, and real estate technology) company,operating a hybrid online-to-offline model. Its marketplace offers open house, closing-settlement services and turn-key mortgage financing.

One of Vietnam’s leading proptech startups, Propzy bagged a $25-million Series A round led by real estate private equity firm Gaw Capital and SoftBank Ventures Asian in 2020.

Online-offline model

Besides Propzy, several other startups are also chasing the online-offline brokerage model as Vietnam’s real estate market has witnessed a boom in smart technologies, including in property sales, leasing or marketing activities to real estate management, in recent years. These include Rever, which snagged a $10.2-million investment from Mekong Enterprise Fund IV; Houze, which bagged $2 million in a round led by DKRA Group; and Reti, which raised a seed funding round from investment firms CyberAgent Capital and VIC Partners.

According to Olivier Raussin, co-founder and managing partner at FEBE Ventures, real estate transactions are complex and require a high level of trust… offline components help establish consumer trust whereas online/tech components allow companies to scale.

“We believe that having the right mix of offline and online components is key to winning in the proptech space and differentiating from incumbents”he added.

Echoing Raussing, Tung Tran, managing director of VIC Partners, said the dissolution of Propzy’s Vietnam entity is certainly not the end of the online-to-offline brokerage model. “There are other companies that are growing superbly well and making healthy profits. Developers, agents and buyers are all more open to technology (partly due to COVID19) but still need offline touchpoints to gain trust” he said.

However, many industry experts believe that Propzy dissolved its Vietnamese legal entity related to direct sales staff because it had to spend too much money on operating the broker’s group that competed directly with the massive traditional brokerage system stretching across the country. 

Currently, Vietnam has over 300,000 real estate agents, according to statistics of the Vietnam Association of Real Estate Brokers that were released by local media in March.

Traditional agencies in the country still play an important role in determining consumer choices, so there is a significant challenge for proptech startups in the sales and marketing space. Take, for example, One Mount Group, a traditional company founded by Vietnam’s real estate giant Vingroup and its partners. It developed OneHousing, a one-stop-shop platform for real estate transactions, embracing the digital wave. 

Many other traditional real estate enterprises have also invested in technology or forged M&A deals to develop proptech, such as Cen Group, Sunshine Group, Hung Thinh, etc. 

Market overview

During 2020-21, when investment flows into the proptech sector touched over $10 billion globally, leading proptech markets in Asia, such as China, Hong Kong and Singapore, received capital of about $700 million, according to a report by Savills.

Riding the global wave, the Vietnamese real estate market also saw huge investments in proptech startups from the end of 2021 to the first half of 2022. There are at least five proptech startups that have announced new funding rounds, including Reti, MGI Proptech, Houze, Homebase and Citics.

Vietnam’s proptech market is estimated at $500 million, according to The“Property Insight Program – Episode 6”.

According to the data of PropTech Vietnam Network, there were about 150 proptech startups in the market as of 2021, in which the listing model (data source) dominates the market in terms of numbers. 

Source: DealStreetAsia