Property technology or Proptech, as it is popularly known as, refers to technology tools that the real estate industry uses to improve the way real estate is bought, sold, researched and managed. Examples of proptech are big data, artificial intelligence (AI), machine learning, virtual reality (VR), augmented reality (AR), Internet of Things (IoT), 5G, and blockchain.
Broadly speaking, it is applied to a wide range of processes and transactions, including how real estate is planned and designed, developed and constructed, bought and sold, leases, managed and operated. The proptech sector, consisting of an ecosystem of start-ups and innovative products across the commercial and residential real estate markets, is relatively new. It emerged as a real estate tool in the late 1990’s. Currently, proptech is available in 64 countries worldwide, with around 8,000 proptech companies globally, according to PropTech Global Trends 2020. The US holds the lion’s share of proptech companies accounting for 59.7% worldwide, while continental Europe accounts for 27.2%. Asian proptech real estate industry accounts only for 3.5% and is largely dominated by China.
Proptech is usually classified as residential proptech and commercial proptech. Residential proptech are the digital products developed by real estate companies to improve the way homes are bought or rented. Examples of this are property search platforms powered by AI, property sale tools, financing tools, mortgage lender software, property management tools (IoT-powered tools) etc. Commercial Real Estate proptech refers to tools companies use to search, rent, and sell office, industrial, and retail property assets. This includes property search platforms, construction planning and management tools, evaluation and financing tools (transaction underwriting & management, debt financing platforms, etc.), property management tools (IoT-powered tools) and asset utilization tools (co-working & co-living spaces management, retail and industrial buildings management, etc.)
Traditionally, the real estate industry has always been slow to leverage technology. This is not so with proptech, which is quickly emerging as the future of the real estate sector. The 2022 Global Real Estate Council Chair says that big tech companies invest around $600 million into commercial real estate proptech weekly. Real estate startups have more chances of securing funding, if they leverage technologies such as AI and Machine Learning. According to Grand View Research, the global real estate market size was valued at USD 3.69 trillion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 5.2% from 2022 to 2030. Considering the huge potential in the sector, proptech start-ups and venture capitalists funding them have grown exponentially in recent times.
Real estate companies have become more and more data-driven in their approach, using data gathered from Artificial Intelligence and other tools to make investment and operating decisions. Companies are getting better at capturing data, storing it, and using analytic tools for decision making. PropTech provides tools such as sensors to capture and use data to make intelligent decisions. It can be used to obtain and utilize market data to screen and evaluate development, investment and leasing opportunities, manage investment underwriting process, facilitating the execution of real estate transactions remotely, supporting the leasing process and lease administration, providing additional insights about tenants to improve tenant relationships, operating buildings and homes etc
All the stakeholders of the real estate sector stand to gain from proptech. Real estate brokers are using proptech for easier data collection & AI-driven marketing to screen and evaluate the development, investment, leasing, buying, and selling processes. Automation of paperwork saves time and resources for other tasks such as market research, gaining new customers, closing new deals. In the post-Covid digital world, real estate brokers can use technology to do remote transactions and digital contracting for a faster and easier buying experience. The NRI community has benefited the most from such emerging technologies. Without any paperwork, home buyers can buy property easily. Proptech contactless solutions such as facial and touch recognition are becoming popular tools.
Proptech also has the potential to change the way landlords and tenants interact. Landlords can employ proptech tools such as smart devices and sensors (IoT), to gain insights into how tenants utilize the space. Property owners can check property remotely using security and maintenance data, without visiting the property. Technology eliminates geographical boundaries with virtual reality. House tours can be done virtually, which allows property owners and tenants to do this from the comfort of their homes.
For real estate investors, proptech allows them to accurately plan construction to reduce mistakes or failure to meet a deadline. Technology can be used to improve market research to track the development, investment, leasing, buying, and selling opportunities. It can also be used to remove middle men in securing contracts. There are many other benefits to proptech. It is disrupting the way real estate properties are planned, designed and constructed by leveraging new technologies such as virtual/augmented reality, drones, and technology-enabled design and construction. Use of proptech is accelerating the construction process, reducing waste, improving quality, and reducing the overall costs of construction. Data analysis can help real estate developers predict the best location to build a new building and choose the amenities that would best fit their residents.
Big data, an important pillar of proptech, is transforming real estate analytics. Real estate professionals are using big data to determine a property’s future risks and opportunities. Proptech startups are using big data to forecast property prices with greater accuracy. Proptech big data can also be used to improve marketing of properties as big data analytics tools can be used to redefine target buyers and get better offers. Data can also help in risk analysis of investing in new projects.
India’s real estate industry has been slow in embracing change. While many have understood the need to employ proptech, others are still catching up. The failure to adapt to change can make companies inefficient and leave them behind. To stay competitive, real estate companies must adopt new technology and practices. In the future, proptech will have a huge impact on the sector, with the potential to completely transform and disrupt it. Future winners and losers of the real estate sector will be decided by their willingness to change and adopt proptech in their business.
(By Shiwang Suraj, Founder & Director, Inframantra)