Part 3 – The Digital Revolution
As the Coronavirus rolls out, we see people, families, organisations, and businesses are being disrupted by innovation and digital transformation. Restaurants, gyms, childcare, salons, retail, and universities have had no choice but to rethink their product, and the value they offer. All businesses, from the sole proprietors to the large multinationals, need to continually adopt systems and processes that will give them an edge. The same applies to the real estate industry.
Here we examine PropTech and one of its categories, Blockchain Technology. We analyse the impact it is making on the transformation of real estate as a business. I provide a brief outline and its important aspects. I particularly like the aspects Blockchain Technology and believe that it will play a significant role in transforming the real estate industry.
Before the pandemic, PropTech was the buzzword, but many in the real estate industry sat on the fence waiting to see how it is being implemented. However, with this crisis, PropTech will start gaining momentum much faster and will disrupt the traditional norms of how business is done in the real estate industry. But what exactly is PropTech? What does PropTech mean for real estate professionals? What are the issues at stake? If you do not understand what PropTech is and how it is going to affect the industry in the future, you better start learning now. Otherwise, you will be left behind, and your business will start suffering.
What is Proptech?
Proptech is part of a broader digital transformation in the property industry. It considers both the technological and mentality change of the real estate business, consumer attitudes, movements and transactions involving both construction and planning. It can also be described as a term for start-ups offering technologically innovative products for the real estate markets. Today, several verticals emerge within PropTech such as ConTech for the building industry and FinTech for the finance industry. The diagram below provides a more precise understanding.
Current PropTech Trends
Below are some PropTech examples that are currently used by industry experts.
- Big Data – Big data assist real estate parties to make informed decisions. It provides information such as the history of the property, current value, neighbourhood profiles, mortgage payments and estimated forecast of future valuations.
- Blockchain – Blockchain is gaining momentum. This software is starting to revolutionise and take over traditional methods transactions and finance in the real estate industry. This technology is described later under its heading.
- Building Information Modelling (BIM) – BIM is a smart 3D model process that assists architects, engineers, and contractors to, design, plan, schedule, construct, and manage buildings efficiently. This information can be used throughout the life cycle of the property.
- Drone Technology – Drones provide excellent viewing for a large property and allow a tour of a neighbourhood to be conducted remotely. It has assisted agents in selling large estates by providing valuable information and property overview to the buyers. With new developments, a drone tour can educate a potential buyer on the geographical and cultural traits of an area.
- Geolocations – Geolocation technology can transform maps into full-blown sets of critical data. It allows developers to make a better assessment of the location and its surroundings. It also provides crucial information when marketing a development.
- Internet of Things (IoT) – IoT refers to appliances and devices that are connected to the cloud and in a constant state of sending and receiving information. Soon IoT will offer more comprehensive resources for a homeowner to utilise, like informing them of the maintenance history of an appliance.
- Sustainability and GreenTech – The concern for climate change and sustainable living is not foreign to the real estate sector. Efforts are made to include technology that makes living more energy-efficient and sustainable.
- Virtual Reality (VR) and Augmented Reality (AR) – Both VR and AR applications in real estate have minimised the problem of property viewing by multi-fold for all involved parties. A potential buyer can fully see a property from even thousands of miles away or features that have not been constructed yet. Also, AR could allow an agent to amplify, or more closely describe, parts of a home to the probable buyer.
Blockchain technology has already disrupted the financial services sector through cryptocurrency. The food supply chain industry has also adopted it. It is no wonder that real estate has not escaped blockchain disruption either. Globally, real estate is worth hundreds of trillions of dollars but is dominated by wealthy individuals and large corporations. Through blockchain technology, more people are be able to access the market where transactions can be made more transparent, secure, and equitable. Smart contracts on blockchain platforms allow assets like real estate to be tokenised. Tokens can now be traded like cryptocurrencies like bitcoin and ether.
The three main elements of the blockchain are:
- Decentralisation: All the data that is stored inside a blockchain is not owned by one single entity.
- Transparency: Data that is stored inside the blockchain can be seen by everyone who is a member of the network, and the data can be traced right to its very origin.
- Immutable: All the data that is inside the blockchain cannot be tampered with because of cryptographic hash functions.
Below are some of the features where blockchain has changed the real estate industry.
Platforms and Marketplaces
Real estate technology has traditionally been focused with listings and connecting buyers and sellers. However, blockchain introduces a new way to trade real estate more systematically through trading platforms and online marketplaces. By tokenising property, assets can then be traded much like stocks on an exchange, and transactions can be done online.
Blockchain can improve the efficiency and the security of transactions. It does not require “trust” between two parties to conduct business. Each party has a unique identity on the blockchain via cryptography. It means consumer information can be shared securely during transactions. A person can send funds to another person that will not be released until the transaction is formally completed.
Smart contracts are self-executing with specific instructions written on its code which get executed when certain conditions are made. Smart contracts on a blockchain make these contracts immutable and transparent unless privacy features are used.
One of the most significant problems with traditional real estate is liquidity. With tokenisation, they can, in theory, be readily traded for fiat currencies through exchanges. It means a seller does not have to wait for a buyer who can afford the whole property.
Through fractional ownership, blockchain lowers the barriers to enter real estate investments. Traditional investments require significant money upfront to acquire a property. With blockchain, investors can access a trading app to buy and sell even fractions of tokens.
One of the most thrilling aspects of blockchain technology is the tokenisation of real assets. Tokenisation not only increases the liquidity of traditionally illiquid assets, but it will also make it possible to trade those assets without a third-party. Instead of one person owning one property, it can be possible for multiple people to buy tokens of the property and co-own the building.
Blockchain can cut intermediaries out of the real estate transaction process, which reduces costs. Brokers, lawyers, and banks have long been part of the real estate ecosystem, and blockchain may shift in their roles in real estate transactions. It also makes the process much quicker as the back-and-forth between these middlemen is omitted.
HOW TO KEEP UP WITH NEW TECHNOLOGY
For the older generation who have been in the real estate industry for several years, the adoption of new technology can be overwhelming. Changes and improvement in technology are real and inevitable. By not embracing these shifts, you will be left behind, and so will your business. Below are some helpful tips to improve your knowledge and experience of the PropTech era.
Follow industry news: By keeping up the latest news and trends in technology, the more informed you will be. It will improve your ability to predict any changes in the market and assist in communicating with other industry experts on the same level.
Talk to the younger generation: Technology is second nature to the younger generation. Talking with them will give you an idea of the new trends. Also, the younger generation is the future market, and it helps to understand their real estate needs.
Invest in technology: It is wise to invest and use new equipment and software related to real estate. By using hardware and software will improve your technical skills and know-how.
Innovate: When you become conversant with all aspects of the digital space, it will give a platform to innovate. You will start analysing new ways to improve the performance of traditional real estate models. You may come up with a new PropTech idea.
DO YOU HAVE ANY INNOVATIVE IDEAS?
As a veteran in the real estate industry, I have learnt to adapt and work with new technology. I am not a hand’s on in every aspect but have a good understanding of how the technology works. Currently, I am working with a technical team in developing a blockchain platform for the development and finance industry.
Do you have any innovative ideas that can transform the real estate industry? Or can you see a problem currently in the industry where technology can improve its performance? If so, let us start a conversation.
I hope that you have enjoyed this series on THE REAL ESTATE INDUSTRY AFTER COVID 19. If you want to be notified of any future post please subscribe.