How technology is Impacting Real Estate Industry?
Authored by Rajiv Nehru, Head-Training and Product Development, RICS South Asia Technology is increasingly playing an important role in the Indian real estate sector. Property technology also known as proptech made its presence felt in the sector around 2005 when we saw the emergence of online real estate market places such as 99 acres, magicbricks.com, housing.com etc. The start-ups disrupted the way home buyers looked for the property. It allowed home buyers to look for properties from the comfort of their homes and compare properties online. Historically, real estate agents have a bad reputation, which has created considerable cynicism in the minds of customers. While online real estate market places have not completely replaced real estate agents, they have created opportunities for a more transparent and improved home buying process. Home buyers usually visit multiple properties, before deciding on the one they want to buy. It is a time-consuming process. Online marketplaces use 3-D modelling and virtual reality, which offer a virtual tour of properties. It allows users to access a virtual walkthrough experience of a property, which is under construction, without visiting the property. Developers use customised colour palettes, furnishing, lighting etc to help buyers visualise their future homes. A Goldman Sachs report says that by 2025, VR will be an $80 billion market, with real estate accounting for about $2.6 billion of it. In India, many technology start-ups and popular online real estate marketplaces such as commonfloor.com, offer virtual reality tours for real estate. The RE sector, which has always been conventional in its approach, is moving towards the adoption of other cutting edge technologies such as Artificial Intelligence (AI). AI is the ability for a machine to solve problems by learning over time. In the pre-construction stage, AI can be used to ensure that there are no flaws in the initial construction plan, to avoid frequent changes in plan during the construction process. Data analytics has assumed a lot of importance in real estate. Real estate companies can use AI algorithms to make sense of data and improve areas of business such as marketing, finance, accounting etc. Artificial-intelligence powered 'chat bots' on websites can be used to handle routine enquiries from customers about properties, its size, its proximity to particular locations, expected price, etc. Globally, many real estate companies are incorporating chat bots into their websites. This allows companies to save on customer service costs and optimize time spent answering questions by allowing a virtual assistant to answer common questions that don’t change from customer to customer. AI can also improve the security of homes. Virtual devices, camera, fingerprint recognition technology can improve the security of homes. Blockchain technology is another technology, which can make a big difference to Indian real estate. It pertains to real-time interaction with databases available on the web. These databases can be updated by numerous users and come with validations and data discipline. For example, if you are working and editing a document on the web, someone else can do it simultaneously, without stopping your work and the documents get updated by both in real time. In this context sharing of data is seamless and non-corruptible as it gets transferred in an encrypted mode. One basic advantage of Blockchain is that it will not be prone to virus attacks, as the data does not sit in one centralized location and is not prone to localized attacks. Also, Blockchain which started with the concept of Bitcoins uses concepts such as Artificial Intelligence and the Internet of Things to make the process run by integrating databases in real time. Blockchain will make the industry efficient and will have an impact on the Real Estate Sector. The primary benefit of Blockchain is that it is a direct link from business to service and vice versa without any intermediaries, thus saving cost, time and clutter. Blockchain technology became popular with the proliferation of Crypto currencies such as Bitcoin etc. As far as the readiness of the realty sector for implementation of Blockchain technology is concerned, there are no centralized processing centres; hence infrastructure availability will not be a question. The technology is based on how databases can communicate seamlessly; hence that also is not a constraint anymore. The implementation of Blockchain technology in the real estate space will have a large impact on how certain processes run as of now, for example, purchasing materials for every developer is always a puzzle and they do not know whether the price they are paying is the lowest and whether the source is reliable. Blockchain technology has real-time transactional data and one can compare and ascertain at what price to buy and from where. The limitation of Blockchain technology in the realty sector is limited to the user’s vision which means that it will have far and varied applications based on the user’s inquisitiveness. Blockchain technology can be used in the realty sector in many ways. In fact, wherever data comparison, verification, authentication and assimilation are required Blockchain will find its application. The Blockchain technology can find its application in the Realty sector over the entire life cycle from pre-feasibility to execution and later maintenance of projects. Many processes within the real estate development life cycle like Product specifications, pricing, smart contracting, procurement, property registration information and due diligence, project progress, sourcing, work procurement, customer profiling, product design, customer preferences etc. will be processed through the Blockchain technology to bring out realistic data that can be then used as business intelligence to drive sustainable operations. One example of Blockchain application in the real estate sector would be to find out the clear title of land, ownership details, the number of transactions happened on the land parcels, litigations if any. This information will be very crucial and will help save time, cost and avoid fraudulent land deals. This will bring out transparency in the business and safeguard the consumer/end customer. Blockchain technology becomes crucial when there is a lot of dependence on empirical data and wherein speculation is part of the business. Also blockchain is critical where unknown data can result in distrust and agony to the end user, all this and more is happening in the realty sector as transparency is at a premium and information is scattered, hidden or ambiguous. I would here emphasize that the Real Estate Regulation Act (RERA) which is enforced now in India should specify using blockchain as an effective tool over the project life cycle. Also In the reality sector procurement of goods and services at the right price is always a guesstimate, the buyer tries to negotiate hard and wants to undercut as he does not have a clear understanding of product differentiation, specifications and quality. Hence bad quality materials get consumed as the final fulcrum of all transactions is price. Using Blockchain in the realty sector will make the businesses more reliable, sustainable and respectable. Let’s understand the Blockchain technology application through an example, let’s assume a group of persons who do not know each other invest in buying a hotel through an online process, they may not be able to buy the entire hotel on their own hence they buy a “Part” of the hotel as a share, say they buy the hotel at $10 per sft. All investors put in money as per their investment capacity and finally the hotel is bought physically. Now the hotel is taken on lease by a hotel portal like Air BnB and booking happens and revenue commences. The revenue then gets transferred to each investor as per their investment exposure and make the process seamless and without any intermediaries. The application of blockchain can effectively be done using a REIT fund for realty investments. The blockchain technology will revolutionise the way businesses are conducted bringing is more speed, efficiency and global benchmarking. Organisations those who are adapt to Blockchain technology can expect exponential growth due to the information and transaction edge they will have in real time.
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