What is Proptech and How It Transformed the Real Estate Industry
Posted on Oct 13 2022 8:04 AM
"Theses: Technology has significantly disrupted many processes in the real estate industry. In this article, we will be looking at the different PropTech waves and how it has transformed the industry."
Theses: Technology has significantly disrupted many processes in the real estate industry. In this article, we will be looking at the different PropTech waves and how it has transformed the industry.
What is Proptech and How It Transformed the Real Estate Industry
Nobody expected technology to infiltrate the real estate industry and become a driving force for digital transformation.
For many years the property sector has stuck to traditional practices and did not want to adopt newer trends. However, the rise of real estate portals and other more recent technologies like AI, data analysis, and mixed reality hardware greatly benefits the property industry.
Proptech is now changing the “modus operandi” of real estate developers, construction companies, agents, consumers, and many others involved in the real estate industry.
The number of disruptors is growing daily, and people are using them to satisfy customers and grow their businesses. Private investment into the sector hit $32B in 2021, a 28% increase from 2020. That is why this article will talk about PropTech and its impact on the real estate industry.
What is PropTech?
Property technology, commonly known as “PropTech”, are tech tools that help in the scaling, construction, management, and investment of real estate.
Real estate technology is disrupting the old fashion in which properties are built, managed, bought, or sold.
The cross-industry technology benefits to all parties involved - customers, investors, developers, and property management companies - making it a buzzword in the real estate industry.
The PropTech industry has seen 3 major waves of PropTech trends that many industry leaders and investors have funded. The reason for the trends was to experiment with different technologies that could impact the real estate industry, such as AI, virtual tools, IoT, etc.
Proptech Wave 1
PropTech 1.0 lasted for 20 years. Like many other technological revolutions, the invention of the personal computer in the “80s” triggered the start of the first PropTech wave. PCs came along with better computing power, which gave rise to the various real estate market analytics companies. Much more data was generated than ever before and was fed to analytics. Internet traffic skyrocketed throughout the 90s. All of these innovations provided real estate companies the ability to make better decisions using data.
In these 20 years, developments in e-Commerce gave rise to FinTech, which later started the second wave of PropTech.
Proptech Wave 2
Here people started using PropTech technologies like smart homes and buildings. Companies found a way to provide better real estate services using virtual reality and data analytics.
PropTech 2.0 is driven by startups backed by venture capitals that innovate property and portfolio management, home services, insurance, rent and sales search, agent tools, IoT, mapping, and co-working spaces.
These startups can be divided into three verticals - Real Estate FinTech, Smart Real Estate, and the Sharing Economy.
Startups in the real estate FinTech vertical ensure that the trading of properties is faster and more convenient. This significantly helped to reduce the illiquidity of the solid asset class.
Smart real estate companies provide services that make buildings highly functional and operate at a low cost. Lower operational costs translate to better returns for investors.
People expect that the second wave will solve some problems of the real estate asset class problems like lease contracts, depreciation, supply-side regulations, etc.
Proptech Wave 3
PropTech 3.0 brings even further innovation and introduces technologies such as big data, AI, 5G, and much more. It has metamorphosed into a complex set of systems involved in every aspect of the real estate industry.
Real estate players welcomed technologies that could automate lead generation and building management. This wave brought about the rise of fully integrated multi-pain point solutions that affected every aspect of real estate.
Today, PropTech players can:
- monitor the location of a project online
- attend online sales galleries
- communicate with the sales agents
- check mortgage eligibility
- buy a property
- monitor and manage damages, and more all online.
How PropTech is Transforming Real Estate
PropTech will continue to impact the real estate industry in multiple ways. It has already changed lots of internal processes in the industry. As technology advances and people find innovative ways to augment their profits, here are some of the ways PropTech will affect the future of real estate:
Easier Data Collection & Interpretation
Brokers are already using PropTech big data analytics to structure and document large data sets efficiently. It significantly increases lead generation and amount of deals closed. Add this to the use of AI-driven marketing, which helps in screening and evaluating development, investment, leasing, buying, and selling processes.
No Geographical Boundaries
Delays in the process of buying and selling properties caused by physical interactions have been reduced by digital engagement. It is now possible for a client to wake up and tour an apartment in another state without moving. This has been made possible by AR/VR technology.
PropTech has eliminated the need for lots of paperwork when purchasing or buying a property.
With digital contracting, buying and selling properties has become significantly easier and faster. A process that could take months has now been reduced to days and weeks. Smart contracts outline the terms and conditions between the seller and buyer, which are written in code.
Streamlined Maintenance & Communication
IoT devices have made the maintenance of building seamless and faster. There is no longer the need to visit the property physically. Everything could be done remotely using software that collects data from the sensors. The software can also follow up on maintenance services and ensure the repairs are done.
One of the leading PropTech solution developers is Sloboda Studio. They have extensive experience building and scaling PropTech apps that have helped companies in the real estate industry streamline their processes.
A good example is the PropertyRepair tool scaled by Sloboda Studio, which automates work order status tracking for real estate. It helps property managers save time on property maintenance using an AI scheduler, which automates vendor follow-ups.
Accurate Construction Planning
Using software to create virtual 3D models of a building under construction can go a long way. It helps to accurately predict how the building will look when it is done. These virtual models can also forecast the building process and lifecycle expenses.
BIM or building information modelling is a process that construction experts use to create virtual 3D representations of buildings. It has become a standard for optimizing and integrating the dimensions of a building under construction.
Sustainable infrastructure refers to systems, equipment, and buildings created to meet a population's needs, including buildings, bridges, roads, telephone pylons, etc., using all-around sustainable practices.
Sustainability and quality infrastructure are among the main drivers of modern society and the economy. It plays a key role in providing better social, economic and environmental conditions and supports development since it expands access to critical services.
The process of creating sustainable infrastructure is complex and long-term by nature. However, its primary goal is to ensure that infrastructure attains its environmental, economic, social and development objectives. It aims to provide guidance, best practices, data and analysis to help decision-makers deliver key aspects of quality and sustainable infrastructure.
Also, using data collected from manned aircraft and satellites, it is now possible to position buildings in sustainable areas, ensuring they last longer. Moreover, incorporating intelligent building management systems which control lighting, ventilation, security and power systems can significantly reduce the cost of running a building.
Main PropTech Technologies
The real estate sector is undergoing constant digital transformation. The numerous advanced technologies available for businesses make the competition in this industry fiercer. Customers now demand better services and their expectations keep increasing. This leads to a higher demand for PropTech technology.
On the other hand, real estate professionals also demand more complex PropTech to help them provide better services. Their success significantly depends on how efficiently they use PropTech compared to their competitors.
Now, let's check out some of the top five PropTech trends changing the real estate industry.
Artificial Intelligence (AI)
AI can be found everywhere, even on small devices like phones. So, why not in homes?
Residential and industrial buildings are all objects with different parameters that can be analyzed, such as energy consumption, housing equipment state, et. AI-based real estate software processes the data collected from these properties using IoT devices and generates reports.
Huge amounts of data from everywhere have made brokers very effective. They have a lot more data to determine property value, selling rate, amount of time they have sat on the market, etc. This data can be used to better advise clients looking to buy or invest in a property.
On the landlords’ side of things, they can leverage data to understand the property value and lease rates and even predict growing trends within the market.
Data alone will not make any sense. However, using it to predict the future is a superpower for PropTech provides. Real estate players collect historical data and use machine learning and predictive analytics to foresee the future.
This technology enables people to visit properties virtually and tour them without having to be on site. This has been extremely instrumental, especially during this COVID-19 period.
Now, landlords or people who are interested in buying commercial property no longer have to go physically to the location.
Internet of Things (IoT)
IoT encompasses the millions of devices connected to the internet and sharing data. In real estate, multiple IoT devices help reduce maintenance costs, predict repair, monitor premises, etc.
Sensors are included in buildings, which transforms them into smart buildings. These devices stream data about parameters such as temperature, pressure, humidity, etc. Using this data, experts can set alerts for routine checkups and repairs.
Digital transformation in real estate for agents means that the initial point of contact is now online. Therefore, agents need a new way to manage leads at every sales step. This is where chatbots come in. They have been integrated into platforms and assist agents in managing client inquiries.
A chatbot can start initial conversations with a lead and even provide answers to frequently asked questions. Nowadays, this technology has become simple and cost-effective to implement. So, almost every real estate website is using it.
To Sum it Up: The Future of PropTech
PropTech has already become part of our lives, benefiting everyone in the real estate industry.
With technology moving at a fast pace, these new norms will also definitely be challenged and changed. So, in the near future, we will continue to see innovative trends pushing real estate boundaries.
While real estate will contribute about 10 percent of the GDP by 2030, experts predict it will emerge at the top if players continue investing in technological innovations.
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