Proptech and the Current real estate ecosystem
Owning real estate is about occupying a physical space, either one’s own or leased and rented. It is measurable, defined yet limited, an asset that appreciates over time. Unlike products, it cannot be carried from one place to another, wrapped up or stored. Yet, it’s immense value lies in the belief that property is indispensable and ties in deeply to personal identity. The eco-system of the real estate industry mirrors this complexity, built around space that is available and sold, an interplay between key players, to satisfy the basic need of possessing the land.
Unlike finance or education where stakeholders are clearly defined at every stage of the buying cycle, real estate has traditionally been one of chaos. Too many players call the shots, government regulations differ across geographies, stakeholders are a mix of experienced and those with just the expertise. This industry interplay has been developed over time, bits and pieces added over the years and practiced with experience. In a country like India, real estate is a predominantly family-run business, where a few entities monopolise the whole. Other countries function differently. At every stage of this industry, people have developed a system of functioning that best works for them.
However, despite its seemingly large ecosystem and interplay, a few core concepts still define the industry;
. No Creation – Land cannot be invented or created. It can be discovered, but humans haven’t left much chance of that. Land can only pass hands, be developed or destroyed, reclaimed or renounced; just methods and means to pass it on from one hand to the other.
. Ownership Matters – Freeholder and Leaseholder are two unchanged terminologies defining the buyers. One defines ownership, and the other holding it for a fixed amount. These terms pertain to defining primary jurisdiction over properties. The roles are well defined but disorganized. Everybody knows their place in the ecosystem, but the entire process operates with low efficiency.
. Primary Stakeholder – The government is a primary stakeholder in the property. Besides setting rules and regulations, the government also manages acquisition, sales, leasing, and contracting.
Real estate is therefore an industry in constant flux. Changes and restructuring are ongoing. At the core of it are the stakeholders, people who bring the entire ecosystem together, cogs in the wheel of how the industry moves and functions.
THE PROPERTY EXCHANGE
Properties are built or developed on the basic premise that once finished, will be bought or purchased. Sellers have shaped the industry in the way we see it today. The identification of land, reservation of public utilities such as hospitals and schools, and building of properties by developers has always been the general flow of functioning. With the advent of malls, multiplexes, restaurants, the needs of people have changed and certain other factors have replaced the traditional requirements. People today are ready to travel hours to work but want to be close to supermarkets, parents keep entertainment as top priority and schools an option that can be worked around. The property industry has thus been slowly transforming from a seller-led to a buyer-led way of functioning.
If one were to drop a marker at when this change exactly happened, then the late 1970’s was the inflection point. As population growth began to happen, so too the rise of media and products and ways to market to an astute, informed, and growing audience. Builders began to get competitive, advertise heavily, and create a cacaphony around comparisons of rentals, locations, and pricing. As offers in real estate increased and more players joining the fray, so too did the choices for buyers. Suddenly people began to realize the power they wielded over the property market, becoming more choosy, perceptive, and intuitive in the process.
With the above changes, there came a shift in industry mechanics. From a few key players, the industry amassed a dozen more stakeholders. Builders now needed surveyors, purchasers, lawyers. Brokers or middlemen began to get their own accountants and marketers. Architects and designers became integral to the entire look and feel of the property purchase and sale.
The advent of technology has been an unforeseen intervention, which the real estate industry is still trying to work around. Although already in place in fringe real estate activities like project management and inventories, it is yet to get into the heart of real estate and streamline products and services. Transparency is a key factor that technology is able to facilitate, detangling the complex web which the industry has been mired in for several decades.
Proptech as a term can be very misleading, when looked at from the lens of mere digital transformation. In its essence, it is making a decades-old industry increasingly transparent and will continue to do so in the days ahead. Not only do tools and tech make processes easier, but they help put customer experiences at the heart of the industry. Market transformation is the buzzword, and this isn’t about just fitting sensors or automating products to make buying more lucrative. Alex Edds, director of innovation, at JLL UK reiterates how the industry has only scratched the surface of proptech and yet are already experiencing significant changes. “At its core, proptech addresses fundamental questions of how we experience and extract value from real estate. Putting customer experience at the heart of the property, and building structures and processes around it will be the single biggest gamechanger.” Tech is set to take power from the industry and give it to consumers and this will redefine everything, from the quality of materials and services to time management, pricing, and niche products.
Stakeholders play a key role in the real estate industry, and in subsequent writeups, we will see how technology is changing the way every entity in the ecosystem is transforming and aligning to push for overall growth of the industry.
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Co-authoring this piece with Charmaine Kenita, on my learnings in Real Estate, Technology, Future challenges, and mapping the way forward.