Real estate revolution with Proptech

Emerging trend: Proptech

  • Technology is continuously evolving and changing the way people live and operate. In the real estate sector, technology is surely transforming how the industry works from investments, selling, buying and management of properties among other functions. As such, it is inevitable that the future of real estate is tech-incorporated; we never can ignore or evade this development. This leads to the big agenda, PropTech.
  • PropTech refers to technologies in software, service or hardware that are designed to assist in the activities and processes within the real estate space. They include buying, selling, and management of properties. Similar to Fintech, PropTech is designed to streamline the operations of the real estate industry; to make them more efficient, cost effective and faster.
  • The advancement of technology has led to significant transformations in all sectors across the world. The real estate industry, like other industries, is not immune to the opportunities and challenges associated with technology. The issue is no longer what PropTech is but instead how best to adopt and incorporate it within the real estate industry.
  • The global PropTech ecosystem has experienced exponential growth in the recent years attributable to the fact that stakeholders, investors and players in the sector are increasingly becoming aware of the many benefits and opportunities associated with technology therefore quickly embracing it.
  • Globally, the PropTech investments have been steadily increasing at about 36% annually in the recent years and are expected to increase further as more tech startups and venture capitalists eye the real estate market’s potential.
  • According to Future Market Insights, the global PropTech market size is estimated to be US$ 19.6 billion in 2023 and is anticipated to have a significant CAGR of 9.3% during the period of 2023 to 2033. The PropTech market size is projected to reach US$ 47.8 billion by2032. The total number of established and startup PropTech companies currently is over 10,000. The United States has the highest number of PropTech companies, about 59.7 percent of the world’s total, followed by Europe at 27.2 percent and Asia at 3.5 percent.
  • In Africa, the PropTech market is relatively small Vis a Vis the global market, however, it is steadily becoming vibrant. There are about 62 PropTech companies currently spread across Africa with more startups expected. The PropTech companies in Africa have cumulative funding of about US$ 99.1 million, according to the Startup List Platform.
  • According to Estate Intel, Nigeria has the biggest share of Africa’s PropTech market in terms of players contributing 46.3% of African’s total. South Africa and Kenya follow at 24.9% and 10.5%, respectively. In terms of PropTech revenue generation, Egypt leads at 86.9% with South Africa being the closest competitor at 9.9%. The East African proptech market remains underutilized despite having a high potential for adoption of technology in the real estate sector.
  • Covid-19 inclined people to embrace the digital world in most areas of life as a result of restrictions on physical interactions during Covid-19 pandemic period. The pandemic completely changed the nature of things, and consequently accelerated the adoption of PropTech in the real estate sector across the globe to enable comfortable and seamless operations.
  • The initial processes of property development such as development plan approval and obtaining a construction permit, which hamper the efficiency of markets in African property markets, are now easily solved by proptech through application of tech-enabled interventions.
  • Proptech integrates several digital solutions and innovations to transform and improve how people can buy, sell, rent and manage their properties. It uses artificial intelligence (AI), virtual reality (VR), augmented reality (AR), internet of things (IoT) etc to provide flexible and flawless solutions to the unique needs of real estate industry thereby enhancing efficiency, productivity and scalability. These include;
    • Virtual tours of a property; allows the property owner or agent to show properties to potential renters and buyers virtually through video recording. Clients get to view the property in details comfortably on their computers, tablets or smartphones.
    • Property management platforms, software applications and hosted solutions; these tools are able to perform tenant screening, lease management, rent collections among other functions which then reduce manual tasks, save time and ensure efficiency.
    • 3D Printing; the technology allows for construction of homes quickly, cheaply and efficiently. It enables the design to be more energy-efficient, sustainable and accessible to the disabled. In Kenya, 14 Trees, a 3D printing company, has managed to carry out some projects using the technology. In 2022, the company announced Africa’s largest 3D-printed affordable housing project called Mvule Gardens in Kilifi County.
    • Increased depth of online market places; the platforms enable listing of commercial, industrial and residential properties both for sale and rent, where clients can easily access and find properties that suit their needs.
    • Industry data services; provides accurate real time property data which property managers, landlords and investors can leverage on to make informed decisions.
    • Digital solutions to improve property performance; by providing more efficient, sustainable and user-friendly solutions such as home automation systems, intelligent sensors control lighting & temperature and measure & report equipment utilization.
    • Building, maintenance and facilities management technology; these are able to quickly identify and report property defects.
    • Digital platforms that give property values; by use of artificial intelligence and machine learning algorithms, the platforms are able give estimate property values and offer personalized recommendations to its users eg Zillow.
    • Shared Economy; these platforms enhance home sharing where people let others stay in their houses or apartments for a given period of time at a cost eg Airbnb.
    • Chatbots for 24/7 client support; these are able to accurately respond to clients’ queries at any given time.

Our View

  • As the PropTech ecosystem continues to evolve, it holds a promising future with massive adoption of digital solutions in the real estate sector. Sustainable practices and energy-efficient solutions are expected to gain prominence, aligning with global trends.
  •  It is one of the young technologies but is expected to grow rapidly into the future with a projected market size of US$ 47.8 billion by 2032. Without a doubt, the real estate industry is going to unleash potentials and expand possibilities.
  • Kenya and Africa at large are yet to optimally utilize proptech despite having great potential. There is, therefore, need for Kenya to quickly take on proptech and explore the opportunities presented by the technology. Additonally, collaboration between proptech startups and traditional real estate stakeholders will shape hybrid models that optimize processes and improve efficiency.

Source: Sterling Real Estate Advisory

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