Increasing trust and improving ease of accessing housing finance: Why We Invested in TEAL
"By creating a single searchable repository for lenders, buyers and insurers, TEAL makes the process of property acquisition and mortgages easier and cheaper and improves access to housing finance, especially for those seeking to own affordable housing. By building a comprehensive digital data platform for land and property records, TEAL is creating critical sector infrastructure to improve transparency and trust in real estate markets in India."
The Indian real estate sector is valued at Rs 1530 crores ($200 billion) according to a Ministry of Commerce report in 2021. Despite its size, or perhaps because of it, the sector has constantly struggled to rid itself of the perception of being ‘rent-seeking’ and ‘opaque’.
One of the key reasons this reputation has persisted is because of the management of property records itself. Ask anyone who has attempted to buy a residential property or even lenders who try to enforce their security over land. Records are distributed across different administrative divisions, and property and mortgage documents suffer from a lack of standardisation with linguistic and regional variance, inconsistent quality of record-keeping, and varying extent of digitization. This leads to two key problems, especially with regard to unlocking the value of land-based transactions:
High transaction costs: The lack of transparency creates a high degree of information asymmetry between counterparties to a transaction (e.g., the borrower and the bank). This means that banks, buyers, and insurers spend an inordinate amount of time ‘piecing together’ information which results in a high cost of due diligence. For e.g., banks often price in risk margins that limit credit creation and increase credit costs. This could also open up opportunities for rent-seeking within the administrative apparatus leading to bureaucratic obstacles, opportunities for manipulation by officials, and costly delays.
Limited market-led innovations: The fragmentation of the records makes it costly for smaller enterprises to aggregate this information and act as an inherent roadblock to innovation. Hence the Indian market lacks many of the products and innovations seen in advanced economies, including services like title insurance and digital mortgage finance.
Addressing this dual challenge, Kshtij Batra & Rohan Shridhar started the Terra Economic & Analytics Lab (TEAL) in 2018. Having aggregated information from over 500 million documents, for more than 20 million properties across 24 cities in 7 states, TEAL offers products that enable lenders to effectively underwrite housing loans faster, cheaper, and more confidently.
· This data is accessible via TEAL’s enterprise-focused platform, primarily serving the requirements of financial institutions. The richness of the data and the strength of the product is already evident in the kind of marquee customers who have partnered with TEAL such as HDFC, Kotak & HomeFirst
· Potential home and land buyers as well as other consumers can access this powerful data set as well, for a nominal price, to enable informed and secured home buying.
We believe that, by providing a mechanism for faster property due diligence, TEAL will spur innovation, transparency, and increased access in the property market which will help improve efficiency as well as bring access to credit to those customers. Reduction in time and costs for such lending will particularly benefit the Next Half Billion, who have traditionally not been served by institutional lenders on account of the high upfront costs.
TEAL can help bring about greater trust and accuracy in property records. As the process of aggregating information on a property level reaches a critical scale, the platform will serve as the rails on which numerous innovative applications will be built. Some of these are already present in advanced markets, including applications like title insurance, credit score equivalents for property, reverse auction-based mortgage marketplaces or robo advisors for mortgages, and may serve as examples to emulate.
We are excited to back Rohan & Kshitij in this journey of using efficient, transparent, and accurate access to property records to transform how the entire real estate value chain operates.