Our call continues with ⁠Dayu Dara Permata⁠ and ⁠Ahmed Aljunied⁠, founders of Indonesian proptech ⁠Pinhome⁠, Southeast Asia’s leading end-to-end property transaction platform for first-time home buyers. Catch up on part 1 of our call!

We dive into how Pinhome uses embedded finance to improve transactions across the entire real estate industry and how Pinhome views the confluence of various market indicators leading to the rise of Proptech 3.0 in Indonesia. Finally, Dara and Ahmed reflect on their thesis from three years ago and how far they have come. 

Catch up on Pinhome’s journey from the very beginning in 2020 (Season 2), in 2021 (Season 3), and 2022 (Season 4)!

Highlights and Timestamps

(00:00) Highlights;

(01:58) Introduction;

(02:34) Embedded Finance in Indonesia’s Real Estate Landscape;

“Knowing that financing is a very important piece of the interactions and of the whole kind of real estate transaction, consumers want financing to be embedded. Consumers want the financing to be there as they are searching for their first home or their next homes. Embedded finance is an integration of fintech within the Pinhome platform. We want to be that one-stop solution where, you know, if you think about how we manifest that, it is through financial consultations that are attached throughout the home seeker’s journey.”

(06:12) PropTech 3.0 and The Next Five Years of Real Estate in Indonesia;

“What’s exciting for PropTech is that the infrastructure will be there; the mindset will be there. First-time homebuyers are very excited to look for their first home. There’s going to be over 100 million of them in Indonesia alone…it’s really exciting that we have these AI technologies that are essentially based on large language models that can really power that conversation…the proptech that can be an absolute winner is a proptech that can really adopt and take advantage of the nature of these conversational transactions.”

(10:59) The PropTech Triangle and Coming Full Circle on the Pinhome Thesis;

“The vision is to increase accessibility to property for better livelihood and financial inclusion. And we had theorized that three key things were necessary to achieve this, and that would be digitizing property information, digitizing the property transaction, and digitizing financing…So we’ve been able to validate that all these three approaches are very important to our stakeholders.”

(13:04) Rapid Fire Round;

The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any ⁠⁠⁠⁠⁠⁠Insignia Ventures⁠⁠⁠⁠⁠⁠ fund.

Transcript

Embedded Finance in Indonesia’s Real Estate Landscape

Paulo J: Another trend I think that Pinhome is definitely riding on is this whole embedded finance, which Yinglan just mentioned in a recent CNBC interview, coming up to a trillion-dollar opportunity, a trillion-dollar industry coming out even just from Southeast Asia. So, for Pinhome, I know that you mentioned last year that Pinhome is 50 percent fintech. And so, how do you see this role of embedded finance, or this greater interest in better finance, impacting Pinhome’s own fintech business?

Dara P: Yes, Paulo. That is really precise; Pinhome is a proptech and fintech company. Half of our business is in finance. The reason for that is because, naturally, inherently, real estate is a sector that is very much financing-reliant. 

The developer side, the supply side, are relying on financing for them to build homes. The consumer side, they’re relying on mortgages to be able to purchase homes. And then everywhere else, for example, on the agent side, they’re also relying on financing because of the cash flow profile of their occupations, right?

So fintech is a very important part of real estate as a sector and Pinhome as a business. If you look at the sector, right? Real estate is a very large asset class. And the larger the assets, that means the larger the opportunity for financing—maybe the largest for Indonesia compared to other asset classes. And it’s really ripe for transformation when it comes to financing because the financing in real estate is still very much underpenetrated. 

The penetration of mortgages, when we measure that as a percentage of GDP, is still at below 4%, somewhere about 3%. We compare that with other markets, both developed and also emerging. Say, in China, the penetration of mortgages is at 55% of GDP, and in India, even still at a much higher percentage, at 12% of GDP. In more mature markets like the US or Singapore, that’s like more than 80, 90% of GDP.

So there’s so much room to grow. Now, what does it mean for the consumer side, right? Knowing that financing is a very important piece of the interactions and of the whole kind of real estate transaction, consumers want financing to be embedded. Consumers want the financing to be there as they are searching for their first home or their next homes.

Embedded finance is an integration of fintech within the Pinhome platform. We want to be that one-stop solution where, you know, if you think about how we manifest that, it is through financial consultations that are attached throughout the home seeker’s journey. They don’t have to go anywhere to understand their financial standing; the entry points are scattered and well-stitched throughout the home-seeking journey. 

Mortgage entry points that are attached to the brokerage home-search journey are right there in the listing. As they are scrolling through the listings, they can see their mortgage availability, which banks are available for this particular listing, and what’s going to be the monthly installment for them, right?

What kind of interest they’ll be paying. Agent invoice financing is attached to the home transaction that the agent is facilitating. So as agents are completing property transactions, they are eligible for commission, which they might not get immediately because there’s always sometimes a lead time before they can get their commissions.

So they then have the option to explore potential financing. And last but not the least, primary project financing is also attached to the developer onboarding journey. Of course, it’s going to be very selective. So we have a product that explores financing for primary property developers with highly attractive, highly sellable projects. And that’s also somehow embedded in the developer onboarding journey in the platform.

“Embedded finance is an integration of fintech within the Pinhome platform. We want to be that one-stop solution where, you know, if you think about how we manifest that, it is through financial consultations that are attached throughout the home seeker’s journey.”

PropTech 3.0 and The Next Five Years of Real Estate in Indonesia

Paulo J: I think it’s really interesting how you talk about this, because when you think about embedded finance, usually it’s easy to think about it from the consumer perspective. But it’s also very much embedded, at least in Pinhole’s case, throughout the whole value chain for suppliers as well as for developers. So it’s really interesting to hear about that from you. 

And with embedded finance, I think that just points to this whole property PropTech 2.0, which we’ve talked about in the past. PropTech 1.0 being just a marketplace and then PropTech 2.0 being more end-to-end finance as well. 

Do you see PropTech 3.0 coming in the future? What will that look like for Indonesia? Maybe you can paint a picture for us for the future of PropTech in the country.

Dara P: To give some context, maybe we’ll start with the sector. What is the sector going to look like in the next five years? In that context, then, how will PropTech evolve? 

Property in Indonesia has been in a bearish market in the past few years, right? And then there are some leading indicators such as rising commodity prices and rapid infrastructure growth, the development of the country, right? 

Those are already indicators that in the next five years, the sector will be in an up cycle and anyone who is right now preparing the right fundamentals can tap into the opportunities, riding the wave. 

On the financing side, we believe that interest rates are going to, of course, go back down. There’ll be a significant increase in mortgage origination capacity as banks diversify beyond consumer lending, non-collateral, to more, I would say, sophisticated collateralized lending like mortgages. 

Technology-wise, we’d like to believe that in the next five years, the transformation that’s been happening to the retail goods sector will also happen in the real estate service sector—standardization of tools across property agents, agencies, and developers, them getting more digitized and more sophisticated.

There will be some players that might take more time just because they are heavily regulated, such as, for example, larger banks, and they have legacy systems, but they’ll also— at least the mindset will be there, and the effort will kick off already by then. 

On the supply side, I think there’s still a backlog of housing in Indonesia that needs to be filled in the next five years as the needs for first homes continue to rise from Gen Z and Millennials. They are more financially savvy, right? Looking for homes preemptively. Supply will need to catch up. 

What’s exciting for PropTech is that the infrastructure will be there; the mindset will be there. First-time homebuyers are very excited to look for their first home. There’s going to be over 100 million of them in Indonesia alone. And then at the same time, the way for AI, right? We see the proliferation and just the acceleration of AI, especially LLM being one of the most advanced kinds of technologies in AI right now being developed and being adopted. We see that PropTech will be able to tap into that. 

And if you think about transactions in real estate, it’s very conversational, right? Unlike in e-commerce or goods commerce, where the transaction is more simple. It’s search-based or browse-based, and you don’t have to converse with anybody, and you can make that decision very fast and very quickly. 

Real estate is a very slow-moving transaction that requires complex decision-making, and how the users, consumers are making that decision is through conversations. So, I think it’s really exciting that we have these AI technologies that are essentially based on large language models that can really power that conversation. 

We believe that PropTech will look more conversational; the engagement and interactions between consumers and platforms will be very intense. And the proptech that can be an absolute winner is a proptech that can really adopt and take advantage of the nature of these conversational transactions. 

In Pinhome we are right now laying out the right fundamentals, and we are well positioned to deliver on that.

“What’s exciting for PropTech is that the infrastructure will be there; the mindset will be there. First-time homebuyers are very excited to look for their first home. There’s going to be over 100 million of them in Indonesia alone…”

The PropTech Triangle and Coming Full Circle on the Pinhome Thesis

Paulo J: Well, you just mentioned really brings together our conversation thus far. 

Talking about all the fundamentals that Ahmed brought up with the sector financing, and you talking about all the supply side of things as well and bringing home as well the interesting part that you mentioned of proptech property being that type of transaction journey that lends itself very well to large language models, which makes it a lot more exciting to see how this technology will impact proptechs down the line. 

And Dara just painted that picture of the future. For Ahmed, I wanted to dial back to the past and to 2020 when you and Dara decided to embark on this journey coming out of Gojek. And had this thesis of how Indonesia’s property market would evolve. 

Now three, coming on four years on, how has this thesis come full circle? Is it as you expected in some ways? How is it different from what you expected? Maybe you can paint that picture for us.

Ahmed A: It has definitely come full circle. Indeed, the vision is to increase accessibility to property for better livelihood and financial inclusion. 

And we had theorized that three key things were necessary to achieve this, and that would be digitizing property information, digitizing the property transaction, and digitizing financing. 

In digitizing property information, this is an ongoing effort to provide a single source of truth for all property listings in Indonesia. And discovery continues to be an important use case for property seekers with a larger inventory. Discovery needs to evolve to provide a delightful experience. 

In digitizing the property transaction, the complexity of a transaction continues to stay the same. So having a guide is as important as ever. And what we have found is that teaching the offline and online journey is necessary in a property transaction. 

And finally, in digitizing financing, the variety of financing options continues to expand. So always keeping up to speed with new mortgage products, new combinations of variables that banks offer in their new mortgage products, and continuing to improve the financing journey. The reason why we do this is to increase transparency even more and work closely with banks to reduce time to disbursement. 

So we’ve been able to validate that all these three approaches are very important to our stakeholders. But we have discovered some additional nuances along the way, due to working very closely with each of them.

“The vision is to increase accessibility to property for better livelihood and financial inclusion. And we had theorized that three key things were necessary to achieve this, and that would be digitizing property information, digitizing the property transaction, and digitizing financing…So we’ve been able to validate that all these three approaches are very important to our stakeholders.”

Rapid Fire Round

Paulo J: If e-commerce has the iron triangle, Pinhome has that property triangle, so to speak, bringing all these three elements together. 

So now let’s go into some quick-fire segments. First, I wanted to bring you guys into a minute masterclass and ask if you were to give a class on executing or ensuring prioritization for startup CEOs, which I think is all the more important as the company grows and becomes more complex. What would be the key takeaway you would want the class to have in one line? 

Ahmed A: I would say singular vision driven by relentless prioritization of opportunities discovered through regular stakeholder interactions.

Dara P: For me, it would be the ultimate things that work and don’t work in scaling PropTech Ventures and Emerging Markets.

Paulo J: Moving on to our other rapid-fire round questions. I came up with some new ones since you guys have done this like three, four times already. What superpower of any one of your fellow C-level colleagues would you want to have? 

Ahmed A: I would like the storytelling skill set that our CMO has.

Dara P: I would like the real estate sales skills of our CCO. 

Paulo J: If you would be invited to produce a Netflix series, what would be the title of the show? 

Dara P: It would be Find Your Way Home, a story about finding a dream home. Selling Sunrise, but Indonesia version. 

Ahmed A: It would be living sustainably with urban farming. 

Paulo J: Looking back now, what is a skill, to be a soft skill or hard skill, you believe you should have learned back in your time as a student?

Ahmed A: As a student, I focused a lot on hard skills. So I think a skill is to understand people better. So perhaps behavioral science.

Dara P: Perhaps building and scaling ventures. 

Paulo J: If there’s something that you could automate in your job, just by wishing for it, what aspect of your role would that be?

Dara P: Just overall time management, managing my calendar and then also resources management generally managing all the resources that I’m responsible for. 

Ahmed A: For me it would be processing and summarizing and generating insights on large documents. So this is the reality now. So just waiting for and implementing practical applications for that. 

Paulo J: If you could pick anyone alive or dead to be your 24 seven executive coach, who would it be? And why? 

Ahmed A: It would be the current CTO at Carta Will Larson. So he has written books like Elegant Puzzle systems of Engineering Management where he elucidates many insights in growing an engineering org. So I would love that.

Dara P: Someone alive, Bernard Arnault. He graduated from engineering school, started his career in real estate, but I admire how he managed to build the world’s largest luxury goods empire in the sector. He was completely unfamiliar with it. He was coming from real estate with the female customer segment as its core segment. 

Paulo J: Any other recommendations you guys might have for our audience in terms of books to read?

Dara P: I recently read this book called CEO Excellence, the six mindsets that distinguish the best leaders from the rest. And I find it as probably the best book for CEOs I’ve read in many years. I would recommend that. 

Ahmed A: It’s Management 3.0. So it’s a very interesting exploration of ideas in management and leadership. What makes it really interesting is that there’s a lot of insight that is drawn from systems design and interesting theoretical concepts.