Real estate ready for tech disruption but mindsets need to shift

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In building and construction, the tide of change driven by innovation has been slowly permeating the fastest growing industry in the country.

By KEN MACHARIA

While most major sectors of the economy have experienced significant disruption occasioned by technology and new platforms, the construction and real estate sector has been slow to adapt to new innovative technologies, not just in Kenya, but globally.

For instance, banking has been turned upside down by the onset of mobile money, which has not only created a whole new subsector in fintech, but challenged the traditional brick and mortar banking hall models. In transport, we have Uber, Taxify and Little Cabs while in hospitality, the likes of Airbnb and Jumia Travel are turning the travel industry on its head. Even sectors like agriculture are on top of the game with technology.

In real estate, players – both service providers and users – have struggled to go beyond online property listings while in construction, some of the new building technologies touted to bring the much-desired change in the cost and speed of construction are yet to reach critical mass. Reasons for the low levels of innovation and adoption vary, depending on who you ask and the markets. According to an EY report, the unique dynamics of real estate make the challenge of disruption particularly steep.

“The planning, delivery and management of real property requires a long-term vision, which is difficult to establish in a rapidly changing world,” notes the report.

For instance, the process of property transactions can be complicated, intricate and lengthy making it a challenge for innovators to move the end to end chain to a virtual platform.

Another view, as explained by Financial Times, is that the scale of investments going to tech startups in real estate is measly relative to other sectors, perhaps signaling the low levels of returns compared to the traditional way of doing real estate business.

Embracing technology

However, industry players are in agreement on the benefits of embracing technology and innovation, including having an upper hand in the market, ability to attract investors and buyers through online portals and creating virtual tours of properties.

And although change has been slow, these are pockets of hope that promise to radically change the different aspects of real property management and value chain such as construction, long-term leasing, office letting and residential buying and renting.

At the forefront of pushing for this change agenda are firms sitting in the middle of real estate and technology. Most are less than five years old, and like their start-up counterparts in other fields, address the business to consumer (B2C) or consumer to consumer (C2C) segments.

In Kenya, platforms like Lamudi, BuyRentKenya, Jumia House, KejaHunt and E-Kodi have steadily gained traction among users who include landlords, agents and tenants. The growth of these platforms has partly been fueled by the internet revolution in Kenya and a generation that first Googles before asking a friend.

In addition to injecting transparency in an industry that had been marred by unscrupulous middle men and fraudulent transactions, the platforms have added efficiency – from identifying a property to moving in.

Real estate search portal

The straightforward path to revenue is by charging a subscription fee for listings when the supply side (agents or sellers) and demand side (tenants or buyers) meet the threshold, usually thousands of listings.

Additionally, some of the platforms in Kenya have gone beyond listing and are now generating leads for agents, with some getting up to 80 per cent of their leads from these websites.

This is essentially how one of the biggest real estate search portal in the world, Zillow, makes its money. The company – founded in 2006 by two former Microsoft employees – is well on its way to hitting a billion dollars in revenue this year, and an average of 170 million monthly users.

A subsequent shoot of online platforms running quietly behind the portals is the amount of data collected by listing companies. Data analytics is potentially a game-changer for the industry. Knowing what people are looking for, when they want it and what they will do next can spin off major revenue streams for real estate tech firms.

Social media platforms like Facebook and Twitter remain critical for the players directly dealing with consumers providing a safe ground for customer feedback, enquiries and marketing.

While it appears real estate search platforms are reaching saturation point especially on the residential renting category, opportunities abound in other categories like office space, land leasing and buying, and storage/warehouse facilities.

In building and construction, the tide of change driven by innovation has been slowly permeating the fastest growing industry in the country.

According to the National Construction Authority, there has been a notable increase of mechanised operations including use of premixed concrete in major building works and mechanized scrapping off of existing tarmac surfaces in road rehabilitation. The Authority now requires developers, contractors, engineers and architects to apply building permits online in a system that aims to inject transparency and accountability.

Notably, most buildings coming up are ICT compliant with increased building intelligence such as sensitive doors and lighting systems, while the push for green building for energy conservation is growing by the day.

Innovative building materials

In addition, we are seeing companies introduce innovative building materials that promise to cut the cost and time of construction. These include expanded polystyrene panels and stabilised soil blocks, chemical concrete admixtures for faster curing and stronger concrete; and light weight steel roofs. But despite these innovative solutions, whose benefits are obvious, the old traditional models still reign supreme in the sector.

A KPMG annual report, Building a technology advantage; Global construction Survey notes that although the industry is ripe for tech disruption, a mindset shift among key players remains the biggest obstacle.

“Most construction firms are waiting for competitors to take the first step toward the adoption of technologies to streamline their workflows and improve their data collection,” the 2016 survey reveals. And just like the real estate sector, construction involves many moving parts that make integrated systems costly and complicated, in spite of the efficiency they can inject.

In the end, it will take a major shift of culture – by industry players, government agencies and end users – to help move tech innovation in real estate and construction from informational to transactional.

Photo Credit: s-media-cache-ak0.pinimg.com 

Email: macharia.ken@gmail.com

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