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.
Global PropTech Landscape
The global PropTech ecosystem has experienced exponential growth in 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 and quickly embracing it. Globally, PropTech investments have been steadily increasing at about 36% annually in 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 by 2032. The total number of established and startup PropTech companies currently is over 10,000. The United States has the highest number of PropTech companies at about 59.7% of the world's total, followed by Europe at 27.2% and Asia at 3.5%.
PropTech in Africa
In Africa, the PropTech market is relatively small vis-à-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 Africa'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 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 the pandemic. 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 tech-enabled interventions.
Proptech Solutions in Real Estate
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), and the internet of things (IoT) to provide flexible and flawless solutions to the unique needs of the real estate industry, thereby enhancing efficiency, productivity, and scalability. These include:
- Virtual Tours: 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 detail comfortably on their computers, tablets, or smartphones.
- Property Management Platforms: Software applications and hosted solutions able to perform tenant screening, lease management, rent collections, and other functions which 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 — Mvule Gardens in Kilifi County.
- Online Marketplaces: Platforms that 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 to make informed decisions.
- Digital Solutions for Property Performance: More efficient, sustainable, and user-friendly solutions such as home automation systems, intelligent sensors that control lighting and temperature, and tools that measure and report equipment utilization.
- Building and Facilities Management Technology: Able to quickly identify and report property defects, streamlining maintenance operations.
- Digital Valuation Platforms: By use of artificial intelligence and machine learning algorithms, platforms are able to estimate property values and offer personalized recommendations to users (e.g. Zillow).
- Shared Economy: Platforms that enhance home sharing where people let others stay in their houses or apartments for a given period of time at a cost (e.g. Airbnb).
- Chatbots for 24/7 Client Support: 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, a need for Kenya to quickly take on proptech and explore the opportunities presented by the technology. Additionally, collaboration between proptech startups and traditional real estate stakeholders will shape hybrid models that optimize processes and improve efficiency.
Source: Sterling Real Estate Advisory