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INVESTMENT: Ke.com at the top of the list
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at the top of the list
By Morgan Brady

BT 201904 In depth 01贝壳找房





BT 201904 In depth 02Chinese companies continue to outperform their rivals, especially in the Asia-pacific region, where they receive the highest rankings. Indian companies follow suit, but come in the second rank.

One distinguished Chinese company is Ke.com, which is an online platform providing solutions to people’s property needs in China. The company enables people to buy and sell, rent in and rent out properties, both old and new, and covers around 500 Chinese cities. What is unique about the company’s services is that it enables users to experience the property as if they were there, by the use of virtual reality technology. The company is currently valued at above $1 billion dollars (a unicorn) and operates under the umbrella of Homelink Real Estate Agency (previous name), also known today as Lianjia, which is one of the largest real estate companies in China.

Ke.com topped the list of technology firms in China based on an assessment by Deloitte, a management consultancy. Its revenue grew by 32.179 % in almost two years. It was founded in 2018 and got quick traction since then. A supportive factor for this growth has been the growth in the real estate sector, especially in the main cities. Property investment, housing sales and new construction picked up in the summer of 2018. Rising income levels were a key factor.

Lianjia, a major player in the real estate sector
Lianjia (the parent company) was established in 2001 and has many brick and mortar branches in Chinese cities, such as Beijing, Shanghai, and others. It has three independent business entities, brokerage brand Lianjia, listings brands Ke.com and affiliate agency management brand, Deyou. The large company now controls over 10% of China's real estate market with transaction volume over 1 trillion RMB per annum.

BT 201904 INVESTMENT 02Participation from Tencent in funding ke.com
In September 2018, the parent company intended to raise funding up to $2 billion from prominent firms in China, such as Tencent Holdings Ltd. and private equity firm, Warburg Pincus LLC, as reported by the Wall Street Journal. Tencent invested $1 billion, whereas Warburg Pincus LLC invested $500 million. These funds were meant to develop the Ke.com platform. With this investment, Tencent has shifted from being a competitor to Ke.com to being a major shareholder. The funding decision from Tencent seems to be a strategic one to reduce competition.

BT 201904 INVESTMENT 03Partnership with KE finance
In December 2018, Ke.com partnered with Ke Finance to provide an ever more comprehensive service, which would enable China's real estate consumers to access KE Finance's comprehensive offering of consumer real estate financing services. Customers would be able to access all of the services on a single platform, which includes services ranging from home renovation and rentals to mortgage related products, including payment, loans and escrow services. This gives the platform a competitive edge, as it now would be able to make better offering than banks with its user friendly interface, speed, breadth of services, and convenience.

From Ke Finance’s point of view, this partnership is beneficial, since it enables it to capture a variety of structured and unstructured data, credit data, housing valuation, financial statistics, and user lifecycle needs. The data will then be fed into learning algorithms, which will then design even better solutions to consumers. Ke Finance can provide its services to both ends on the platform, the buyers and sellers, based on their unique needs. Since the financial needs of the buyers and sellers can vary, Ke finance provides high value solutions to both to facilitate the real estate transaction and increase the chances of making a match. This should enable the platform to gain even more traction, by providing more services in a one stop place.

BT 201904 INVESTMENT 04Conclusion
Lianjia looks set to consolidate its presence in China’s real estate vast market. The market seems to be booming, as residential property sales in China totalled 6.6 trillion RMB ($964.26 bil­lion U.S.) in the first seven months of 2018 - which is 16 percent higher than the same period in 2017, based on reports from China’s National Bureau of Statistics. With the financing from Tencent and Warburg Pincus LLC, Ke has managed to secure the funding it needs to build up a strong momentum. The partnership with Ke Finance is also a strong strategic cooperation, which should enable the platform to attract more customers on both ends, buying and selling, given the value that the platform now offers.

Lianjia has been growing since 2011 and Ke.com has transformed it into a technology-enabled real estate company. Lianjia seems to be aware of the trends, both the technological ones and the ones in the real estate industry. After it had noticed that the rental business is a hot one, it moved to enter the market. Now it operates a portfolio of 500,000 rental apartments in nine Chinese cities, worth about 600 billion yuan. The company will likely keep its good performance in the upcoming years.

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