I am sitting at a cafe in Dubai, having a soy latte, with a real estate agent. He hands me a virtual reality headset with my smartphone slipped into the goggle area. I put it on, and the cafe disappears.
Suddenly, I am in West Bay Lagoon in Doha inside an elegant, luxury waterfront villa, and the agent’s voice, who is still sitting across from me at the cafe, seems like it’s coming from space. I walk into a generously sized living area and the kitchen, and the developer follows my tour on his iPad. I take off the headset a few minutes later and return to reality.
Given the economic might of the sector, you could be forgiven if you assumed it was a proactive industry, teetering on the edge of innovation. But it’s an open secret that real estate, the region’s largest asset class, has been one of the slowest industries to adopt new technologies.
We’ve seen aspiring disruptors come and go in the real estate industry in the Middle East. This time is different. Technology is catching up to the real estate industry. Over the past few years, billions of dollars have poured into proptech, a new generation of startups at the intersection of property and technology.
Now, the field is wide open to innovation as proptech continues to infiltrate the industry.
Some specialize in creating VR experiences for real estate shoppers, while others are simplifying the process of buying homes through verified listings and finding financing solutions.
There are now 3D metaverse platforms displaying real estate search and discovery, using technologies like AR, AI, and VR for more interactive visualization. Unicorp Capital developed Xclusiverse that lets real estate professionals interact with buyers in the virtual world.
As the real estate industry transforms how properties are conceived and built, how they are researched, marketed, and sold, and, most importantly, how we buy, sell and rent, proptech startups are developing their in-house technology solutions to differentiate their products and gain competitive advantage.
TECH ENABLES TRANSPARENCY
“The home buying process globally has remained fragmented and complex for years. To purchase a property, one needs to engage with numerous intermediaries along the way, starting with a search, home visits, financing, and closing the deal. There is a lot of bureaucracy and paperwork that makes the experience sub-optimal for all stakeholders,” says Jad Antoun, CEO & co-founder of Huspy, a proptech startup improving home-buying for buyers, real estate agents, and mortgage brokers.
“We leverage technology to support homebuyers throughout the entire purchase journey: from finding a property to financing it and closing the deal,” adds Antoun. “For brokers and agents, this helps close deals faster and earn market-leading commissions.”
Dubai-based digital real estate startup Stake offers retail investors from across the globe to invest in prime rental property in UAE by leveraging machine learning models to back its asset selection.
“Tech integration enables more transparency and collaboration. It’s not only about building a great product but making the real estate world open, borderless, and accessible to anyone. But there is much to improve in the industry,” says Rami Tabbara, co-founder of Stake, adding it’s “extremely important” to develop a purpose-built solution.
Echoing the same sentiment, Alex Galtsev, CEO of Realiste, says, “It is important to develop purpose-built solutions for the real estate market. AI technologies offer the possibility of optimizing the analyzing and developing process.”
Realiste has developed an AI-powered tool that enables real estate investors in ten major cities in the world, including Dubai and Riyadh, to see the asset’s price history, discover the average price in the neighborhood and book it online without having to travel or deal with third parties. The system also notifies the asset owners when it’s the right time to buy or sell their properties.
“AI technology helps to analyze the real estate market’s big data based on 120-200 parameters: prices, price growth, discounts, exposition time, city areas, property valuation rating, marketability, and possible ROI, among others,” adds Galtsev.
There are efforts in some countries in the region to make the real estate market more transparent. Dubai entered the “transparent” tier in Global Real Estate Transparency Index 2022, and its property market was deemed the most transparent in the MENA region after enabling public access to all real estate data in the city.
“At this point, technology development is one of the major focuses of the UAE’s government. And as real estate is one of the key markets here, it is highly influenced by innovations, especially AI,” says Galtsev.
“Technologies in the real estate market will solve issues slowing market growth. The misspelling and mispricing of the properties are among them,” he adds.
Even Saudi Arabia’s sovereign wealth fund, PIF, has set up
a similar real estate power arm, the National Real Estate Registration Services Company (RER), to build a comprehensive real estate registration database that includes details of the kingdom’s public, commercial, residential, and agricultural units.
“A purpose-built solution is imperative for success, especially when solving multi-billion dollar challenges. Real estate is the world’s largest asset class; however, the buying experience is not reflective of the large amounts of money people spend,” says Antoun.
BUILDING A TECH STACK
Yet, there are still commercial real estate companies who haven’t considered their “tech stack” or a wide deployment of proptech in their assets. And according to experts, they should be immediately sourcing technology to have a solid understanding of the industry.
“Since digital transformation strategies have gained traction post-pandemic, commercial real estate organizations have had to adopt tech-based solutions to address their business needs, and ease communications with customers, rendering the processes more proactive,” says Tabbara.
According to experts, real estate’s future lies in the ability to integrate tech solutions seamlessly to meet the demands of the modern real estate investor and end user.
“Building a well-integrated tech stack is a consideration many real estate firms have made in the last few years, even before the pandemic, given the obvious need to think digital-first,” says Tabbara.
“The shift from web to mobile and the use of data-driven decisions has prompted companies to leverage modern tools, particularly on the cloud, to deliver hassle-free experiences to their customers,” he adds.
INVESTORS POURING MONEY
With the acceleration in the adoption of technologies in real estate, investors are in a race by investors to pour money into proptech startups. Having watched tech startups upend industries like taxis and hotels, investors have homed in on real estate as a big opportunity because parts of the industry — like pricing and mortgages — have been slow to adopt software that could make business more efficient.
In August, Stake raised $8 million in a pre-Series A round from investors like BY Ventures and MEVP to expand its portfolio and launch in Saudi Arabia and Egypt; in July, Huspy raised $37 million in a round led by venture capital firm Sequoia Capital India; and the Saudi real estate app Deal, pioneering in receiving and fulfilling real estate requests, raised $2.24 million in its pre-series A round to launch new features and expand beyond the kingdom in February.
Saudi Arabia’s Watheeq Financial launched a $26.7 million venture capital fund to invest in startups leveraging technology in the real estate sector.
PROPTECH IS THE FUTURE
According to market data, the proptech sector is anticipated to grow by 16.8% between 2022-2032, from $18.2 billion in 2022 to $86.5 billion in 2032.
Apart from the market projections, experts say proptech ensures that operating and transacting in and owning real estate is more efficient for end users — agents and investors.
“Proptech is the present and the future of real estate. The property lags woefully behind sectors such as finance and media that have reinvented themselves through technology over the last few years,” says Finn Hefferon, Head of Product at Stake. “Real estate can be revolutionized through artificial intelligence, the Internet of Things, and blockchain technologies to deliver smarter, more efficient homes and office spaces, cheaper and more robust construction practices, shared access to residential and commercial spaces, fully immersive digital viewing experiences, and more.”
Many commercial real estate companies have spent decades building their brand, and like building construction, a solid foundation is the key to success. Things are quickly changing, and as the region evolves and tech integration accelerates, legacy commercial real estate can’t afford to sit back and watch it happen.
“Technology has already permeated major economic sectors. However, real estate remains largely undisrupted. Different market players tend to focus only on one step of the journey, be it mortgages or real estate listings. Yet, each step is just a small part of the buying journey,” says Antoun.
“Technology and innovation are also creating new efficiencies to streamline processes and improve the speed at which transactions can be completed. And, like in any sector, we must ensure that technology is being adopted to solve big challenges,” he adds.
ROOM FOR REAL ESTATE AGENTS
However, adopting technology in the sector isn’t all doom and gloom for the region’s real estate agents. While proptech will ultimately bring all listings online, real estate agents are still critical for the most important part of the purchasing process: advisory service.
The value of expertise, after all, is timeless, says Antoun.
“Industry experts, be they real estate agents or mortgage brokers, remain the pillars of the industry’s success. It’s such people who bring in years of knowledge, insights, and expertise that builds trust with buyers and inspires confidence in purchasing a property,” says Antoun.
Despite the need for human dexterity, it is undeniable that the future of the real estate business will revolve around technology and data -– from leads to listings.
“The industry is growing yearly and gaining momentum; companies are focusing on digitalization,” says Galtsev. “Technologies will change the industry into a fully online organized system. I dream of making it possible to buy real estate online worldwide in a few seconds, making the purchase easy and transparent.”
Economic reforms on foreign ownership and ever-evolving visa initiatives create buoyancy in the commercial sector. Many companies are relocating their operations and employees from eastern Europe and Russia to the UAE and Saudi Arabia.
Overall, the demand for commercial properties in the region will continue to thrive as many businesses return to normal operations and new entrants head to the Middle East to explore new markets and business opportunities. Stake plans to expand into Saudi Arabia and Egypt and venture into bigger opportunities like commercial property investment. Husky acquired three mortgage brokerages to consolidate its platform’s home financing expertise and distribution.
“The Middle East has had online property offerings for a number of years. However, many have focused only on listings or just one part of the buying journey. Compared to our global peers, proptech in the region is still in its early stages, with untapped potential,” says Antoun.
Real estate companies must combine their market insight with new technology, as its impact will separate the strong from the weak.