Is proptech a real game changer for the real estate sector?

The advent of innovative technology solutions and the gains reaped from it have catalysed digital enablement across most industries.

Real estate is no exception.

As the industry grew more receptive to disruptive technologies, prodded by widespread digital adoption and the demand for greater convenience, it saw the rise of specialised tech solutions focused on real estate asset and property management – known as proptech.

The scope of proptech has expanded significantly in recent years to include information transparency, AI-powered valuations, virtual viewings, online listings and blockchain transactions, among others. With widespread adoption, 2019 proved to be a banner year for proptech, securing $2.6bn of global investment, up from $1bn in 2016, a KPMG report suggests.

“There has been increased demand for proptech related services within the real estate industry. Part of this can be attributed to growth in digital transformation within the industry including areas such as asset digitisation, predictive analytics in real estate asset performance, IoT in workplace management and data analytics surrounding overall market performance,” notes Mark Hamilton, head of digital solutions, MENA at real estate services provider JLL.

“Because many of these technologies are new, it gives way for proptech companies to develop and innovate solutions tailored to the specific technology subsets. Many developers and occupiers are excited about these technologies and have objectives of implementing these technologies within their real estate portfolios.”

Mohamad Kaswani, CEO at property portal Urban adds: “Technology has the opportunity to enhance every part of the journey for landlords, tenants, property managers and others in the property ecosystem. Digitalisation improves efficiency, creates transparency, and helps all of us make better informed decisions. It also empowers seamless and consistent experiences from virtual tours to online payments and contracts.”

Digital adoption in the real estate space was further fuelled by the onset of the Covid-19 pandemic. As authorities activated protocols to contain the spread of the virus, necessitating social distancing and isolation, multiple real estate players resorted to technology with a renewed sense of urgency to ensure business continuity. Consequently, proptech gained further ground.

“The pandemic has forced all industries to re-evaluate how they do business, and the real estate sector is no different. All the players in the industry, from developers to brokers are now transforming how they cater to the needs of their customers digitally – from remote viewings, digital contracts, and rental platforms, the ripples of change are spreading throughout the sector. Digital transformation is no longer about having a competitive edge; it’s about surviving and staying relevant,” notes Ammar Malhi, head of client relations at Dubai-based SmartCrowd, MENA’s first financially regulated real estate investments platform (REIP).

Dubai spearheading innovation
Digital adoption within Dubai’s real estate space has also been substantiated by the evolution of the emirate’s smart ecosystem and its adoption of innovative services and projects. The Dubai Land Department (DLD) introduced AI into the valuation process of real estate properties last month, with the move expected to help reduce the valuation processing time to 15 seconds and cut the cost by 20 per cent. DLD introduced AI to verify ‘Ejari’ contracts back in 2018.

Furthermore, the interest in proptech has grown in part due to the initiatives undertaken by private sector entities. As the Covid situation evolved, UAE-based Property Finder launched a new feature enabling people to live stream a house viewing and leave real-time comments for agents.

Even after the pandemic eases, customers may continue to opt for a virtual viewing over a physical visit primarily due to increased convenience, the promise of faster turnaround time and better sustainability practices.

Pacing ahead
The evolution of digital solutions has also made real estate investment affordable and accessible, say experts. Real estate investment platforms encourage investors – novices and seasoned – to consider a range of property investments using a crowdfunding model. SmartCrowd, which acquired a full licence from the Dubai Financial Services Authority in November 2019, allows people to invest in real estate starting from Dhs5,000. Rental income from the properties is transferred into the investor’s digital wallet on SmartCrowd.

“We are quite bullish on the prospects of REIPs moving forward. Given that real estate prices have declined over the past few years, investors with a long-term outlook are realising that investing small amounts today allows them to take advantage of bargains in the market, without taking on too much risk. By reinventing the customer experience with an obsessive focus on transparency, security, and healthy returns, we feel that REIPs will transform the real estate market by offering distinct advantages to each segment of society,” explains Malhi.

SmartCrowd’s investor base has grown by 300 per cent and assets under management have risen by over 230 per cent, he confirmed.

Moving ahead, disruptive technologies such as 3D architectural renderings, IoT technologies, and integrated softwares look set to alter the landscape and the structures we work and live in.

“When IoT data and 3D visualisation of real estate space can be combined to represent in real time the digital replication of an office building, this is known as a digital twin. This industry is projected to be worth $35.8bn in 2025, compared to $3.8bn in 2019, according to research firm MarketsandMarkets. The team at MIT’s Real Estate Innovation Lab says the benefits of digital twins for the commercial real estate industry are many, including management of building occupancy, increased budget reliability and faster delivery in the construction realm. Given the projected growth in the industry, we can expect to see digital twins implemented as almost an industry standard across many asset classes,” predicts Hamilton at JLL.

Urban’s Kaswani concludes: “We expect an accelerated move towards digitalisation of the rental and sales experience at every level (discovery, viewings, payments, etc) based on the evolving expectations of tenants and landlords today. There’s also massive opportunities for collaboration between fintech and proptech from financial instruments to support home ownership to renters’ insurance and deposits.”