Virtual reality has taken center stage in China’s tech scene this year. Chinese tech giants like Alibaba and Tencent are all competing for a piece of the VR market, and VR startups are popping up everywhere, largely driven by the “wow” factor of VR technology: immersive content and sleek hardware.
“Everybody is talking about virtual reality…making a VR headset, making VR controls, [and] making it more advanced,” says Peter Choi, the Director of Palapple, an IT solutions startup based in Hong Kong. “The thing is, we have to put it into action and fit [virtual reality] into normal life.”
Like many startups, Palapple started developing its own VR products. Last December, the company created a project called VResidence (V视点), which covers a number of VR real estate products, including an online platform for ‘secondhand’ property. The platform lets real estate agents show VR tours of ‘secondhand’ apartments, a reasonable distinction in China where so many new or ‘firsthand’ apartments are built every year. Palapple isn’t the first company to create VR tours for the real estate industry, but Mr. Choi claims they are one of the few targeting the secondhand property market.
Using VR To Sell ‘Secondhand’ Apartments As Real Estate Growth Slows
“Secondhand buy and sell and rental is our focus market,” says Mr. Choi. “We don’t need to intervene a lot, we only need to send people to take a panorama picture for [real estate agents]. Then right away we transfer [it] to our server, do the 3D transformation, and within half an hour, it’s on [our platform].”
Palapple’s choice to focus on the secondhand property is a strategic one. It allows the company to invest a minimal amount of resources on technical development, while maximizing its ability to scale in China’s real estate market. Unlike ‘firsthand’ property, which requires VR rendering and modeling of unfinished buildings, creating VR tours of secondhand property can be done with panoramic photos.
“We don’t want to be too technical in this area,” says Mr. Choi. “What [real estate agents] really want is they have to make the customer make the decision fast.” For property that clients might potentially buy or rent, an offline visit is unavoidable, he says.
“You really need to go there and have a look, so why do everything on VR?” he says. “There’s no point. What we’re trying to do is balance everything and make it just right to fit into the industry.” By offering clients virtual tours, real estate agents can help clients quickly identify property that they’re interested in and close rental and sales agreements faster, says Mr. Choi.
It’s a bare bones approach towards virtual reality, where business development takes priority, not the “wow” factor of the technology, as we often see in China’s early-stage VR market.
In order to capture panoramic photos of secondhand property, Palapple works with third-party logistics companies. The startup provides the company with one week of training and a panoramic camera, such as a Ricoh THETA S. When a real estate agent sends in a request for one of their apartments, the logistics company goes in and snaps panoramic photos of the property. Once the agent makes a sale or closes a rental agreement, the startup receives 5% of the real estate agent’s commission, part of which goes to the logistics company.
“We need to involve [the logistics company] because we need to do the economy of scale, especially when we’re talking about the entire region of China,” says Mr. Choi. “In Hong Kong, we can hire people and…still achieve the margin because Hong Kong real estate is the highest in the world. But that’s not the case in China.”
Tapping Into The Mainland Real Estate Market
The Hong Kong based startup has ambitions to expand into China starting in May, and has already sealed partnerships with Chinese real estate developers such as Vanke (万科). In China, Palapple will have several competitors, such as 51wofang.com and Home Director (指挥家, our translation). However, both startups primarily focus on modeling firsthand property in VR, which has a higher production cost, according to Mr. Choi. Though Palapple also provides VR modeling services, it’s a minor part of the startup’s business, which depends on the high turnover rate of secondhand real estate.
“The major hurdle for firsthand developers is that the decision process is way too slow,” says Mr. Choi. “We’re a startup – we have to grow, right? We need to scale fast so we can’t wait for their decision.”
In China, real estate is a lucrative industry that has created quite a few billionaires, including Wang Jianlin and Hui Ka Yan. However, the firsthand real estate market has slowed in recent years due to oversupply. According to the National Bureau of Statistics of China (NBS), as of November 2015, 441 million square meters (around 4.7 billion square feet) of the gross floor area (GFA) of new homes is finished but unsold. Given the more consistent flow of students and young professionals seeking rental property, the market for secondhand apartments may be more stable.
In addition to Palapple’s platform, where users can select property to view through Palapple’s VR app, the company also has its own headset. The company plans to sell its headsets to real estate agencies, though the VR app is compatible with other headsets as well, according to Palapple. At the end of March, the company will officially launch their online platform for the Hong Kong market.