PropTech or Property Technology is on the rise and it is encouraging digital innovations in the real estate investment sector. Hence, it is evident that technology in real estate is no longer a myth, but a reality.
Artificial Intelligence, Data Science, and Blockchain are some of the emerging technologies in real estate. These are disrupting traditional property dealings and gradually shaping the future of the real estate.
Technology in Real Estate: why does the industry need a disruptive innovation?
1. Tedious Paperwork
Real estate transactions are still largely paper-based.
Face-to-face transactions take up a lot of time and limit property sales only to local buying and selling.
Moreover, physical documents often leave room for error and damages.
2. Capital intensive platform
The real estate industry is traditionally an illiquid asset. It requires high costs of entry with a larger capital than any other investment.
As a result, only wealthy and accredited investors are the key industry players.
And, retail investors with little or no resources have to bear various transaction fees, low ROI, and higher interest rates against loans.
In Real Estate, the need for transparency, the accuracy of data, performance, and ethical standards are on the rise.
According to the Global Real Estate Transparency Index published by JLL, 70% of the countries worldwide have reported an improvement in transparency in the last few years.
4. Incorrect Predictive analysis
Investors should always study the historical trends in a location and the upcoming value of a property before investing in it.
However, the analysis becomes impossible due to limited analytical capabilities and manual processing of such large volumes of data.
Disruptive Technology in Real Estate: use cases
1. Data Science
The real estate sector is a huge ecosystem that generates a huge amount of complex data every day.
Real estate professionals can use this data to understand the market better and make wise investment decisions.
So, Machine learning algorithms and Data analytics or Data Science is one of the most useful technology trends in real estate.
Data Science is the process of extracting knowledge and insights from structured and unstructured data through machine learning, cluster analysis, and big data.
Let’s have a look at the ways data science can be applied in the real estate market:
Property Price Indices
Data analytics uncover historical trends and figure out a property’s individual characteristics, locality, demographics, and other critical data.
As a result, it uses sub-market indices to correctly predict a property’s current price and its return potential.
Automated Property Valuation
Automated Property Valuation helps in the accurate estimation of an asset’s value based on real-time market data.
Furthermore, this also helps in determining the value of mortgages and loans for a particular property.
Time Series Prediction
Time series analysis helps in forecasting the state of the property in the future.
So, it uses many microeconomic factors like GDP, inflation, stock market indices, and mortgage interest rates.
This real estate technology finds patterns of similarity and differences in property prices across the same or different locations.
Further, it also detects the time periods in which the prices are likely to be similar.
As a result, investors and real estate agents can design data-backed smart business strategies for separate markets.
Geographic Information System (GIS) is a real estate technology trend that Proptech companies use as mapping software for property location.
These spatial analysis techniques link customer data with the map of an area.
So, investors can select a location based on important factors like accessibility to utilities, transport, competitor analysis, etc.
2. Artificial Intelligence (AI) and Machine learning
Artificial Intelligence or AI and Machine learning enable smart investments in the real estate market.
AI algorithms produce insights into current and future market trends, increase investment returns and discover useful opportunities.
Moreover, AI personalizes investment experience by displaying online property listings based on an individual’s social media activity and preferences.
As a result, users can shortlist suitable properties based on:
- Building amenities,
- Area crime rate,
- Nearness to the marketplace, institutional and educational buildings,
- Accessibility, etc.
Besides, investors can use AI and machine learning to learn about the future market value of a property from its current market data and historical trends.
Also, they can access area information and characteristics such as crime rates, schools, and transportation before investing.
AI Chatbots are also available 24*7 on property search websites. These ask users a series of questions and filter the answers to display customized results.
Furthermore, these chatbots can also schedule video tours and property visits.
Hence, real estate professionals can use this real estate tech to make insight-based investment choices for better returns.
Fibree.org’s Blockchain Real Estate Industry Report observes that as of July 2020, 297 start-ups dealing in real estate were using blockchain technology, compared to over 400 a year earlier.
Blockchain technology in real estate simplifies property search, removes intermediaries, and digitalizes record keeping, and secures property transactions.
In the distributed P-2-P network of blockchain, sellers can share the property data, which interested investors can access without any additional brokerage fee.
Moreover, Smart contracts replace brokers and these take care of property listings, payments, and legal documentation.
Thus, a real estate transaction not only speeds up but also becomes inexpensive and efficient without paperwork.
Besides, smart contracts also allow real estate asset tokenization of a real estate asset and create “micro-shares”. As a result, smaller investors can get fractional ownership of local as well as international properties.
Furthermore, smart contracts automate both domestic and cross-border payments and digitally verify property and owner credentials.
Hence, blockchain not only enables faster and cost-effective transactions but also makes them fraud-proof and transparent.
Read Lilypads’ article on Blockchain in real estate here.
4. Cloud Storage
The real estate industry still depends on face-to-face, paper-based transactions.
But with the growing importance of technology in real estate, private, hybrid or public cloud storage is transforming the sector.
Cloud Storage is the process of data storage on the internet through a cloud computing provider.
This storage serves as a data management software for the user to securely access anytime from any device.
Hence, realtors can use cloud storage as a remote database for organizing and storing their business data and property information.
It also helps in cutting down costs related to server and IT maintenance.
Furthermore, proptech companies can easily share their files and data with potential buyers and sellers.
5. Internet of Things (IoT)
The digitally connected network of “smart” devices and sensors makes up the Internet of Things (IoT).
IoT today takes care of various aspects of property transactions starting from predictive maintenance to property management.
It helps in virtual property tours through a dedicated mobile app that quickens property hunting.
Further, IoT also creates smart homes with intelligent security and electricity systems that owners can control remotely.
As a result, investors can use building management systems (BMS) to increase the resale value of a property and enhance the living experience.
The Lilypads Bottomline: Technology in real estate is the true disruption in the industry
The market for technology in real estate is booming. Hence, the faster proptech companies adopt these technology trends, the better they can increase their profits.
According to the 2018 KPMG Global PropTech Survey, 90% of real estate firms were viewing PropTech as an opportunity. Crunchbase.com reports, over the last 10 years, investment in PropTech has increased from $1.1bn in 2010 to $27.2bn in 2018. It also reports that the total amount invested in PropTech across this period (2010-2020) is $92.4 bn.
So, the disruptive impact of technology trends in residential as well as commercial real estate is real. Top technological skills are growing productivity in the industry, increasing its efficiency, and unlocking great investment opportunities in the market.