The Power of Proptech // Bringing Fresh Business Opportunities

The Power of Proptech // Bringing fresh business opportunities

Global real estate is worth more than USD 217 trillion and accounts for 60% of worldwide assets owned by individuals. 

Despite being the single largest asset class, real estate has long remained a sector yet to be revolutionized by technology, and it has only been recently that it has been infused with innovation. 

During the past decade, buoyed by the sheer size of the opportunity in real estate, a number of technology firms have made inroads into this traditional industry, creating the PropTech industry and making it easier for both consumers and service providers to transact, own, and share real estate assets.

This new wave has now brought with it new proptech opportunities and is emerging to disrupt real estate and shake up the core underlying fundamentals on which the industry operates.

Growing landlord demand for better data, new apps and other real-estate technology is fueling a boom in proptech and attracting record sums of capital into the sector during the pandemic.

Consider this – in 2008, a mere US$20 million were invested into proptech start-ups and as of 2021, Venture capitalists and other investors poured $9.5 billion into proptech through mid-November, according to data firm CB Insights.

That is the most ever raised in any year, topping the $9 billion invested in the sector for all of 2019, the previous record presenting a huge opportunity in the space.

The new investment reflects how owners of commercial real estate are increasingly relying on technology to drawback workers or customers during the pandemic.

What is proptech and why is it having a buzz now?

We’re in the thick of the Fourth Industrial Revolution – an era of automation and digital processes, powered by blockchain, artificial intelligence and augmented reality. So it makes sense that the way we lease, rent, buy and occupy property follows suit.

This is where proptech comes to play. Proptech is an innovative approach to real estate in which technology optimizes the way people research, rent, buy, sell, and manage a property. 

The cross-industry technology benefits all parties involved – developers, investors, and property management companies – making it a recent buzzword in commercial real estate.

PropTech real estate startups are all those that are attempting to make the real estate industry (especially in highly dense cities) better, more efficient, and easier to navigate for all parties involved.

So what’s driving this technology adoption in real estate? There are a couple of things however, one greatest drive is the maturing millennial market and with technology, millennials use smartphones to find everything from a parking space to a romantic partner. 

As they enter a stage in their life where they seek new property either to live in or for setting up their own business millennials are more comfortable trying out new tech products that fit more seamlessly into their lives.

Great proptech opportunities coming out of this

There are a number of opportunities coming out of this. Here are some of the ops

• Tokenization

Tokenization in real estate is the process of creating a virtual token that would represent ownership of a type of real estate asset. 

It is the ownership of real-world assets digitally on a blockchain. This is similar to the recent digital asset craze, non-fungible tokens (“NFTs”), except a real estate token would be tied to the value of a physical ass

As tokenization is highly flexible in its usability, the token could represent ownership in real estate in many ways. 

The overall type of real estate that can be tokenized can vary just like traditional real estate investing; however, tokenization would allow for little third-party input from the investors. 

As physical assets would back the tokens, the value of the tokens would fluctuate based on the performance of the asset, similar to traditional real estate investing but with the ease of transfer conferred by the utilization of blockchain technology.

The potential benefits of Real Estate tokenization are enormous; the most significant one being bringing liquidity to this ‘illiquid’ asset class, ease in searching for property, undeniable proof of property ownership, among others.

Tokenization will enable higher participation by retail investors, who otherwise don’t have enough capital to purchase an entire property and reap the benefits of such an investment. 

• Real Estate Crowdfunding

Another proptech opportunity is Real estate crowdfunding which is a relatively new way to invest in commercial real estate. 

Some sites give everyday investors access to assets traditionally reserved for the wealthy. Real estate investment platforms (aka crowdfunding sites) pair developers and other real estate professionals with individual investors who want exposure to real estate without the hassles of owning financing, and managing properties.

While real estate crowdfunding is inherently risky, real estate investments can help diversify your portfolio and provide competitive returns. Real Estate Crowdfunding platforms have been around for a while now, catering to niche accredited investors. 

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But this space could really take off in a big way when some proptech startups finally build public real estate exchanges where anyone can participate, making ownership transfers possible at the click of a button with a settlement occurring in the background, at a very minor per trade cost. 

This would enable the creation of a massive, liquid and highly transactional market of real estate interests, fundamentally changing how we perceive this industry.

• AI  and Machine Learning Services

Real estate agents have to perform so many repetitive tasks that are sometimes quite frustrating. Smart real estate professionals leverage AI ( Artificial intelligence) to free up their time.

For example, Restb.ai technology is used to automatically classify property by the type of rooms, features, and style. By using computer vision AI, restb.ai also tags photos to the properties as per given features. Thus, helping real estate agents in presenting CMA (comparative market analysis) to their customers in a more efficient way.

The adoption of machine learning (ML) and artificial intelligence (AI) can also go a long way in facilitating the often document-intensive process of applying for a home loan.

In addition, lenders can use AI to create a chatbot mortgage adviser, which can provide insight based on financial and product recommendations.

• VR (Virtual Reality)

While looking for a property, technology has made it easy that you don’t even need to leave the office anymore. Technology like Virtual Reality is enabling real estate agents to showcase several properties that aren’t built yet or are under construction.

Now that is a real “ Competitive Edge”. While this could be a new phenomenon in the Kenyan Real Estate Market, almost 80% of new home buyers in other countries have purchased their mortgages without even checking out the homes in person.

• Housing as a Service

X as a Service, offerings provide endpoints for customers/consumers to interface with which are usually API driven but can commonly be controlled via a web console in a user’s web browser.

With the success of Airbnb for rentals and Wework in co-working has triggered a fresh wave of technology-based platforms which facilitate the use of real estate assets as a service.  This has now brought in a new aspect known as House as a Service.

This is utilizing living and working spaces more efficiently, while also making them more connected and socially collaborative. 

With coworking, a new phenomenon has also risen that’s Co-living. This trend is already making inroads, particularly among students, young professionals and first-time renters.

Group of young people having breakfast. They are friends who share a living space. Co-living is a new way of life.

Under Housing as a Service, there is a broader trend at play here. Consumers, worldwide, are moving away from asset ownership to an ‘on-demand economy. 

Though quite subtle in the African Real Estate market, an on-demand asset is a trend, already dominating the automobile, furniture, heavy equipment and many other industries, and soon it might become mainstream for family housing too thus presenting quite a huge opportunity.

Housing will continue to be transformed from a product into a service and large tech companies will bring the same efficiencies to real estate that eCommerce players like Amazon brought to shopping. 

• Mortgage Tech

Mortgages are complex, time-consuming and paper-intensive product lines that are ripe for tech intervention. 

There exists a huge opportunity in reducing a typical 30 to 45 days mortgage disbursal cycle to just a few hours; by bringing buyers, sellers, their respective agents, property valuers and lending institutions onto a common platform. 

There cannot be a better time to do this as many lenders across the world today are starting to accept digital authentication and consumer alternate data aggregation as core components of their backend credit decisioning systems. 

There is another large fintech/proptech opportunity in ‘Unmortgaging’ the mortgage itself. First-time buyers face immense difficulty in trying to get on the housing ladder as rising home prices typically outstrip wages. 

Co-ownership models that work as stepping stones between renting and owning have the potential to disrupt traditional mortgages. 

In these models, the occupier puts forth some equity to own a percentage of the house and pays ‘rent’ on the remainder to the capital providers who buy out that remainder. 

The home buyer has the option to buy more of the house over time by adding more equity while tech facilitates automated valuations and brings transparency of ownership at every stage of the financial understanding.