Can real estate technology disrupt the real estate industry in emerging markets? | Atalayar

Emerging markets are increasingly leveraging data and software to disrupt and optimize their real estate markets and meet the needs of young people and businesses.

Real estate technology (proptech) consists of a set of technologies that make commercial transactions around residential properties, offices and businesses fairer and smoother. Operating at the intersection of fintech, building tech (contech), smart real estate and the collaborative economy, proptech ranges from investment platforms to connect retail investors with real estate assets property management platforms.

Last month, Nigerian tech startup Spleet announced that it had received $2.6 million in seed funding, including from Los Angeles-based venture capital firm MaC Venture Capital, to expand its business.

It offers a variety of payment options to its core customer base of middle and upper income tenants in Lagos, including what is known as “rent now, pay later”, a structure similar to the “buy now, pay later” option which develops financial inclusion in emerging markets.

Spleet has processed over $3.5 million in rentals since its inception in 2018, but also has over 68,000 unfulfilled requests, suggesting more room to scale. In July, it became the first African startup to join the MetaProp NYC real estate technology accelerator at Columbia University.

A global market

Against the backdrop of global macroeconomic headwinds, rising US interest rates and volatile real estate prices around the world, proptech has the ability to bring more predictability to real estate markets and connect landlords and tenants through transparent transactions.

Whether Airbnb was an early pioneer in the proptech industrythere are now more than 9,000 proptech companies around the world that are continually adapting their services and models to meet growing urban populations and the changing demands of the global real estate market.

US proptech market expected to grow 16% annually to reach $86.5 billion by 2032, according to consultancy Future Market Insights Global, which forecasts a growth rate of 23.7% for China and 26.5% for Japan.

In the first quarter of 2022, venture capital funding for proptech hit record $4.4 billion, up 41% compared to the fourth quarter of 2021 and 31% compared to the first quarter of 2021, according to a report by the investment bank Keefe, Bruyette & Bosque.

However, rising interest rates undermine confidence in proptech investments in many developed countries as house and apartment prices continue to fall from their post-pandemic highs in 2021 and the first six months of 2022.

New York-based venture capital firm MetaProp produces bi-annual indices that track confidence in proptech investments and start-ups globally. Its overall index for 2021 stood at 9.3 out of 10, but fell to 5.8 in 2022while its index for start-ups moderated from 8.3 to 4.2.

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Open rules of the game in emerging markets

While this represents something of a market correction for developed countries that have been implementing proptech for years, the situation is different in emerging markets, largely due to the increase in the number of people moving in in cities and the resulting demand for housing.

In 2000, about 15% of the world’s population lived in cities, but this figure has increased to 50%, or 4.4 billion people, in 2021 and is expected to reach 66%, or 7.7 billion people, in 2050according to forecasts by the International Finance Corporation (IFC).

Since direct government housing subsidies are not available in most emerging markets, the IFC believes that up to 1.6 billion people will struggle to find housing by 2025.

Pakistan is seen as a thriving space for proptechsgiven its large young population, with an average age of 23, who seek to settle in crowded cities, causing demand for housing to outstrip supply.

Karachi-based MyGhar, for example, offers furnished private and shared rooms with all-inclusive billing, while DAO Proptech uses its platform to offer different real estate options and raise interest-free capital for developers.

Given the potential for growth in markets with similar demographic trends, fintech startups in emerging markets have benefited from significant investment recently, particularly because that a relatively small amount of start-up capital can be very helpful in building platforms and leveraging data.

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Negative risk and innovation potential

At the same time, however, real estate markets are complex and generally governed by their own legal idiosyncrasies, not to mention the different cultural values ​​of countries. In addition, real estate transactions are often private and undeclared, which limits the potential of any data-driven analysis and pushes the market towards a more traditional broker model.

The best example of proptech startup failure in emerging markets is Propzy, Vietnam. After raising $25 million in 2020 with ambitions to expand to Malaysia, the Philippines and Thailand, financial difficulties and an inability to raise more funds led him to announce last month that she ceased her activities.

Nevertheless, proptech’s merger with contech could help the segment weather the headwinds of the global economy.

This approach has been taken by Tel Aviv and New York-based venture capital fund Built Up Ventures, whose flagship company, My Tower, manages more than 250 residential towers in Israel and has also entered the market in Poland.

My Tower’s technological innovations include the use of autonomous robots, advanced artificial vision systems, laser detectors, geo-positioning sensors and inertial motion sensors to reduce operating costs by up to 50%.

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Entry into new markets and regional expansion

Some proptech companies are pursuing regional expansion strategies in order to take advantage of the legal, financial and social frameworks common to the real estate sector.

Proptech companies are enabling the current real estate boom in Colombia, where supply is growing rapidly, but demand remains scarce. La Haus and Habi, two Colombian companies, recently raised $158 million and $100 million respectivelypart of which they plan to use to expand into other Latin American markets, starting with Mexico.

The Haus has operated in four Mexican cities since 2019, and Habi purchased two Mexican real estate companies in January.

Proptech platforms also enable foreign investors to access new markets. Proptech company Naya Homes, which specializes in managing vacations and short-term rentals in Mexico, raised $5 million in funding a fortnight ago.

During this time, in the Middle East, the fintech start-up Stella Staysbased in Dubai, announced last week that it would partner with Cairo-based real estate firm Tameer to enter the Egyptian market.

The companies plan to build new properties, starting with a ready-to-live-in apartment community in New Cairo. Stella Stays is present in the United Arab Emirates, Saudi Arabia, Turkey, Bahrain and Canada.

This article originally appeared on Oxford Business Group. Read the original.

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