Real estate, an asset class worth USD 217 trillion globally, is one of the last industries to adopt technological change. The property market is ripe for disruption, creating a growing demand for PropTech (Real Estate Technology).
What is PropTech?
PropTech, in its simplest form refers to businesses using technology to transform the way individuals buy, rent, sell, design, construct and manage residential and commercial property. It is a small component of an industry-wide transformation of the real estate sector, that helps keep up with changing consumption patterns. The evolution is expected to continue, with several new PropTech initiatives leading the way: smart cities and buildings (Smart Real Estate), the sharing economy, the home building industry (ConTech) and finance industry (FinTech). ConTech and FinTech are considered to have close ties with the real estate industry.
Global PropTech market
PropTech is gaining popularity, as demonstrated by investment figures. In 2017, USD 12.6 billion was poured into real estate technology; almost 3 times as much as the amount invested in 2016. 2017 alone saw the emergence of four PropTech unicorns: Compass, Homelink, SMS Assist, and OpenDoor Labs. Although New York is currently considered to be the worldwide hub for PropTech, the UK is also working hard to lead the way.
PropTech has been experiencing exponential growth since 2014, as demonstrated by CB Insights tracking.
Online property listing platforms like Rightmove and Zoopla, offer added convenience to customers by providing property details online, allowing customers to make decisions instantly. Another startup called Purplebricks launched the world’s first digital estate agent, offering users round-the-clock access to information and a bookings system. Reportedly, more than half of email enquiries to view a property are made outside of most estate agents’ opening hours, therefore round-the-clock services ensure leads are not lost. Such services are also designed to appeal to increasingly tech-savvy millennials in particular, allowing the market to target a new breed of investors.
UK’s private rental market is growing. A report published in 2016 shows that the sector has witnessed a 55% growth over 5 years, making it worth GBP 1.29 trillion in 2016. UK-based start-ups take advantage of this growth with companies like Movebubble allowing individuals to search for UK property listings in real time. Movebubble’s algorithm learns user preferences and provides better suited results each time they search. It also allows users to book viewings and make offers, saving time and money.
How is PropTech disruption in the Middle East
Reports find that GCC countries have generally been slower with PropTech adoption but are now beginning to catch up.
A study conducted by HSBC suggests that several UAE property buyers preferred using technology to gather information before buying a house. The study finds that 72% of UAE buyers look for properties online, 67% check the value of their existing home, 65% look for tax and regulation-related information and 64% look at prices of prospective homes. The study also finds that UAE property buyers are more likely to use PropTech based solutions than their other GCC peers.
The Dubai blockchain strategy will create an economic opportunity for all sectors including real estate and augment the Emirate’s reputation as a global technology leader. According to a plan by the Smart Dubai Office, blockchain technology will be used for all government documents by 2020. This is particularly important for the real estate sector.
With the adoption of PropTech in UAE, ValuStrat has been able to develop its own proprietary system called ‘Speedy’ which helps the valuation team develop and process RICS certified reports at Industry benchmarked speed. Speedy is an iPad-based residential valuation platform that connects surveyors, valuers and managers via a single source platform, enabling it to reduce processing times drastically and deliver full inspection residential valuation reports to clients within 7 hours of survey.
Declan King, Managing Director & Group Head of Real Estate, ValuStrat explains, “Speedy has disrupted the valuation sector in the UAE, combining the most innovative technological platform with the highest of international standards – providing UAE mortgage lenders with a sophisticated service portal and enabling them to move to loan offer within same day of inspection, thus giving them an exceptional competitive advantage and an enhanced customer service offering.”
Speedy augments ValuStrat’s credentials as a PropTech adopter in the region, and because of such disruptive innovation, ValuStrat is the first firm in all of Asia and MENA to be certified and admitted in the exclusive Tech Affiliate Program of the Royal Institution of Chartered Surveyors (RICS). Declan further mentions that “Technology is at the centre of much that we do at ValuStrat. Our firm has spent years building proprietary software solutions that help us deliver innovative services faster, allowing our clients to react quicker and enjoy distinct competitive advantages. Speedy is an example of our continued pursuit towards adoption of disruptive tech to create value for our clients.”
Saudi Arabia as compared to UAE, has also been catching up in the global PropTech market, with its plan to build a smart city termed ‘Neom.’ It is inspired by Google, which plans to build its own digitised smart city in Toronto. The city of Neom is planned under the kingdom’s Vision 2030 – a plan to develop an oil independent economy. Future PropTech is expected to play an instrumental role in the development of this smart city.
How can PropTech transform the real estate market in the GCC?
Crowdfunding is rapidly gaining popularity in the real estate market. It allows a greater variety of investor tiers to invest in real estate. CrowdStreet, a crowdfunding based commercial real estate marketplace allows commercial real estate firms or investors to buy a stake in commercial properties. Other notable ventures include BrickVest, Property Partner, CapitalRise, Property Crowd and Property Moose.
In some countries, the property purchase procedure involves several types of fees and processes. Blockchain technology helps cut down the cost by reducing the intermediaries. Experts suggest that blockchain technology is exceptionally useful for commercial real estate, with its ability to streamline processes while reducing costs. It’s adoption rate, however, seems unclear.
Blockchain will allow seamless cross-border transactions, by creating computer-based processes that do not require paper title deeds, paper licences, etc. Two companies called Propy and Consensys, both of which are active in Dubai, exemplify the latter by integrating blockchain ledgers for the government to allow instant online title deed issuance for your property.
Another application of blockchain is Initial Coin Offering (ICO). An ICO is a way for a blockchain startup to fundraise by offering its own coin in exchange for an investment. During an ICO, a percentage of the coins are purchased by investors in exchange for money, securities or other legal tender, or other cryptocurrencies like Ethereum or Bitcoin. A few start-ups in the real estate sector utilise ICO sale for investments, allowing tokenized pieces of a property to be tracked and traded through a database. These start-ups include BitRent, which is a company that speeds up construction project financing.
- Augmented Reality and Virtual Reality
Virtual Reality (VR) in property is a global industry; one of its uses in the real estate sector is to allow investors to virtually view properties. VR permits interested parties to view properties regardless of geographic distance and still maintain an immersive experience.
VR start-up Seeable uses mobile mapping to build bespoke 2D and 3D property visualisation apps. Their applications are available on multiple platforms including the popular Oculus Rift. In addition, recent technology from Matterport makes real estate listings livelier. For example, homes listed with Redfin come with a 3D walkthrough. Matterport is supplying a dimensionally accurate model of the space exactly how the human eye would see it.
The VR experience does not just end with property purchase. Start-up ‘roOomy’ allows the visualisation of any space with customised design elements thereby aiding in the interior design process. The platform allows users to upload an image of a room and then decorate it to their liking.
- Smart buildings & smart cities
The term ‘smart building’ refers to a structure that uses technology to automate a building’s operations including lighting, heating, and security. The latter increases efficiency and helps decrease energy waste. The Internet of Things (IoT) controls parts of the network infrastructure, allowing systems to be adjusted or switched off remotely. For instance, mobile phones can now be used to control heating systems. Google, Amazon, and Apple are key players investing and innovating in smart home technologies.
The technology has also paved the way for the ‘smart city’ concept. What is a smart city? It refers to an urban development that integrates information and communication technology with IoT solutions to manage a city’s assets including information systems, schools, libraries, transportation, water, waste management, law enforcement, etc. The main goal of a smart city is to improve quality of life by using urban informatics and technology. Data is collected at every step of the way and is used to improve efficiency.
Barcelona is a great example of a smart city. Planners are redesigning the flow using smart-city technology. They are making use of smart parking, smart streetlights and sensors for monitoring air quality and noise. In addition, they are introducing more free Wi-Fi hotspots in public spaces. Furthermore, water consumption and conservation are all aided by smart systems, enabling the city to save natural resources. They have partnered up with start-ups like Pavegen to harvest energy and data from footfall using renewable energy from footsteps.
- Robots in real estate and 3D printing
Currently, construction processes are heavily reliant on manual processes, but there are a number of exciting new applications known as ConTech that are shaping up future construction. Construction giant Komatsu, for instance, has built an automation system using unmanned bulldozers and drones. The drone flies over a construction site and monitors deliveries, inventory, and progress; creating a 3D map of the construction site. The information is used to automatically direct an unmanned bulldozer to lot a course around the site. This automated system helps Komatsu combat the issue of ageing construction machine operators, thus improving efficiency. Before the addition of drones, Komatsu had been experimenting with autonomous dump trucks, bulldozers, and excavators, but they lacked the ability to see and understand the environment around them with enough precision to be useful on their own.
Automation in construction removes worker safety concerns, allowing humans to focus on more cognitive tasks and making robots do riskier tasks. New-York based start-up Construction Robotics has created a bricklaying robot that lays 2,000 bricks per day – an increase from the 400 bricks a day that the average mason can lay. Fewer incidents and increased efficiency can be beneficial to the USD 10 trillion industry.
The UN estimates that by 2030 approximately three billion people will require housing and has listed 3D printing as a potential solution to tackle the challenge. In recent years, construction companies and national governments have created larger, more ambitious 3D printed structures. Chinese company WinSun printed structural components in 2015 that were assembled into full-scale structures. They are said to have built 10 3D-printed houses in 24 hours. In May 2016, Dubai assembled the world’s first 3D printed office termed as “Office of the Future”. Dubai is also the first city in the world to launch a 3D printing strategy termed “Dubai 3D Printing Strategy”. The strategy aims to promote Dubai as a leading hub of 3D printing technology by the year 2030 and commits the Emirates to the use of 3D printing in 25% of its buildings by 2030. In line with that vision, Dubai-based start-up Cazza has shared its plans to build the world's first 3D-printed skyscraper by 2023.