Bengaluru: Home rental start-up Grabhouse is looking for a buyer as the company is struggling to scale up its business, said two people aware of the development.

Cryptopy Technologies Pvt. Ltd, which runs Grabhouse, has initiated talks with online hotel aggregator Oyo (Oravel Stays Pvt. Ltd) and online home rental start-up NestAway Technologies Pvt. Ltd, the two people said, declining to be named.

One of the two people cited above said a deal is likely at about $5-8 million.

Grabhouse and NestAway declined to comment and Oyo did not immediately respond to a request seeking comment.

Grabhouse, which was founded by Prateek Shukla and Pankhuri Shrivastava in March 2013, had last raised $10 million from Sequoia Capital and Kalaari Capital in October 2015.

The company had earlier raised $2.5 million from Sequoia Capital and Kalaari Capital in November 2014 and $500,000 from India Quotient in July 2014.

According to the second person cited above, Grabhouse did not scale up as per expectations because of competition from the likes of NestAway and NoBroker, which have raised significant amounts of funding in the past six months.

For instance, NestAway has raised about $43 million from Tiger Global Management, IDG Ventures India, Yuri Milner, founder of venture capital firm DST Global, and Ratan Tata, chairman emeritus of Tata group, among others.

NoBroker has received about $13 million from SAIF Partners, BEENEXT, Beenos Partners and Digital Garage, among others. Some of the other funded start-ups in the segment are Zocalo, Flatchat, Homers and Zenify.

“Grabhouse has also put their present office in Bangalore on notice. They are likely to either vacate the premises by the end of September or find another company to share the office space. These are all cost cutting measures to keep the company afloat as long as they do not find a buyer," the second person said.

“Oyo is exploring long-stay; hence they have taken interest in Grabhouse. For NestAway, it will increase supply and reduce competition," this person added. In December last year, Grabhouse had laid off at least 100 employees following a restructuring process. Currently, it operates in 11 cities, including Bengaluru, Mumbai, Delhi, Gurgaon, Chennai and Kolkata.

Online home rental start-ups work on two models.

Some of them serve as a marketplace connecting home owners with prospective tenants against a fee, essentially acting as a broker, apart from providing value-added services such as drafting rental agreements.

Others lease the property from the owners, handle end-to-end maintenance of the properties and rent them out.

These start-ups compete with property listing start-ups such as Quikr, 99acres and Magicbricks, which act as a listing platform for brokers and home owners.

These businesses depend on three revenue streams: advertisements, leads for brokers and real estate developers and fees for facilitating buying—right from discovery of a property to completion of the transaction.

The home rental start-ups, however, claim to eliminate brokers.

Also Read: Grabhouse raises $10 million in series B funding

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