Assistant Prof. Shipra Goel talks about technological disruptions which are taking the real estate sector through a massive makeover.
14 August 2017
Role of technology in our lives has been significantly increasing. If we say more people are using cell phones around the world than using a mirror, it would not be an overstatement.
The catchwords like “disruptive innovation”, “IOT”, “digital revolution” are being used excessively indicating how technology has drastically changed the way we think, live and work. With technology embedded into our everyday lives, the impact is all pervasive and can be felt across all industries. But has real estate as a sector also felt the impact of technology transformation and to what extent? Is digital innovation re-inventing the way business is done in real estate? Is technology becoming a facilitator for change and influencing the real estate owners, developers, investors and managers to revamp their business models to accommodate the change?
Technological disruptions are affecting all real estate asset classes as space users and advanced technologies continue to transform offices, homes, retail stores, warehouses, logistics etc. Real estate requirements of mobile workforce and consumers is undergoing a major change as the way they work, shop and live is changing.
In the business to consumer side of real estate, acceptance of innovative technology can been seen to some extent. On the other hand, in the business to business side, barely any technological advancements are yet to be accepted. As per Nirupa Shankar, Director of Brigade Hospitality Services Limited, even the construction industry has been very slow in adopting new technology.
Traditional Offices transform to Modern Spaces by leveraging Technology Integration
Integration of technology is affecting the office segment of the real estate sector, mobile devices and IT infrastructure has now enabled employees to work from anywhere. The most recent workplace concept of co-sharing office spaces has already picked up in various parts of the world.
According to the latest report by Colliers International published on March 20, 2017, it is estimated that more than 1.2 million sq. ft. were leased by co-working operators in India in 2016, which accounted for 3% of the overall leasing volume. Although it represents only a small share of the total leasing demand, co-working operators are planning to lease 8 to 9 million sq. ft. by 2020. Availability of adequate infrastructure, technology support and abundant opportunities for start-ups will further increase the demand for co-working spaces in metropolitan cities like Bengaluru, Mumbai, and Gurugram in India.
After the advent of technology, globally, companies are carefully deploying workplace management strategies for improving on their operational real estate and the surplus space is further sub-let or hived off to create revenue streams.
Automattic, owner of popular content management system (CMS) company WordPress decided to sell its 15,000 sq. ft. state-of-the-art office in San Francisco citing that only 5 employees were using it. Automattic had embraced the remote working culture when it gave the option of working from home or any other comfortable location to its staff. According to a report by Reuters, effective management of a remote, distributed workforce relies on three critical success factors – empowerment, performance measurement changes and the best use of technology.
Brick and mortar stores grappling with e-commerce impact on retail
As smartphone penetration and internet use has increased, the importance of physical retail stores has declined. E-tailers with the high discounts, flexible delivery options and the wide range of products they offer are attracting majority of people. Better deals and discounts is the main reason for half the shoppers to buy online, as per a recent survey done by PricewaterhouseCoopers in India. Off-season sales along with price cuts offered during festive seasons carried out by online players, has changed the customer shopping pattern. The rising preference for online shopping is evident from the growth of online retailers like Amazon.in, Flipkart, and Snapdeal in India.
Multiple stores run by traditional retailers are closing down as more and more consumers are adding up to purchase products online, at least in mature geographies like America. Due to the big shift towards online shopping, big retail chains like Macy’s, Sears, and Target are struggling hard to remain in the business.
Almost 140 department stores belonging to the American retail giant, J.C. Penney have been shut down till mid-2017, these were 14 percent of the total stores they had. J.C. Penney had to take this decision to compete against online retailers. Similarly Macy’s also has announced to shut down 68 more of its store in 2017 after closing dozens of stores in 2016. The pattern of sizing down can be seen for many other big retailers in America as earlier in May 2017, luxury fashion brand Michael Kors announced it would be closing 125 of its 800 stores over the next two years
As we enter the age of the Internet and new technologies, there are several exciting things that are already happening in other countries and we can learn from them and adapt them to our requirements.
Shared Accommodation Models Facilitate Efficient Utilization of Properties for better Revenue Generation impacting the Housing Market Prices
Increased presence of shared housing and short-term rental options in major cities around the world has caused a lot of speculation over the localized impact on the housing market and home prices. The Airbnb platform and other vacation rental property online platforms have created a lot of competition between hosts or property owners. Most owners want to invest their money in the best and most touristic locations so that they are guaranteed to be renting the property most of the year, hence, there are less homes for long term rentals, as well as less homes for sale due to the fact the spaces are being used more efficiently. The direct implication of this phenomenon is supply of housing will decrease thus increasing the value of homes where Airbnb’s are concentrated.
More and more working professionals in the age group of 20-25 are in search of better living arrangements in housing societies, where they can live more freely contrary to PGs in which they have been living so far. Hassle free rental procedure is also a convenience that is missing in the traditional owner – tenant arrangement in our country, this has prompted the organized real estate market of our country to adopt a ‘rent-a-bed’ model. Bengaluru based start-up NestAway which deals in providing services for renting a fully furnished home online along with assisting throughout the rental procedure is one such company which has tapped into ‘rent-a-bed’ business successfully.
This trend has motivated real estate developers to change their apartments into shared accommodation facilities similar to PG’s but different in the level of comfort and services provided. Developers provide access to all facilities and amenities that are available in gated communities, which are not present in PG’s, thus making the young professionals to choose these.
The other prominent players in the managed home rental marketplace segment in India are Zocalo and Homigo. Zocalo’s CoHo Stayz, a tech platform that offers managed apartments and villas in the Delhi-NCR region for long stays, had raised an undisclosed amount in seed funding from startup accelerator GSF’s Rajesh Sawhney, MakeMyTrip co-founder Sachin Bhatia and others.
From Online Property Listing Platforms to Digital Trading Marketplaces
The Indian online realty market has a number of players including 99acres, MagicBricks, PropTiger, Quikr, Housing.com and IndiaProperty. While the simplest of the digital markets in real estate started off as a listing platform for residential, commercial and retail properties, later some also added trading platform to it where transactions could happen. Some of the interesting variants are discussed below:
REX is a digital marketplace and a concierge service for buying and selling residential homes at a fraction of the fees a traditional broker would charge. It includes listing, uploading property photos, directed marketing, legal review and transaction support.
CREXi is a similar platform for buying commercial properties. Real Massive is the first source for commercial RE information. It’s an online marketplace where people can readily share and search for commercial real estate.
HiRise is a JLL platform for a new marketplace for commercial real estate office market. It allows tenants and landlords to connect and complete their transaction online. It is targeted to small and midsized businesses for office leasing.
Buying RE in a group is also an emerging trend in India as collective bargaining offers a better discount for all. Groupon, GrOffr, SnapGhar are some examples of online platforms which facilitate this.
ABL (Asset Based Lending) has created an online wholesale marketplace for RE investors which is free and without subscription. ABL is a direct hard moneylender that specialises in helping real estate investors to finance, fix and flip projects, and refinancing. Since its launch in 2010, ABL has funded 850 transactions with a loan proceeds of USD 185 million.
Sindeo is a modern digital mortgage marketplace and not just a bank or a broker. They have access to 40 plus lenders in the marketplace. They provide dedicated mortgage advisors which help customers avail the right loan at the right time.
LoanDolphin and Joust are similar online mortgage marketplaces based out of Australia where borrowers and upload their requirements and lenders can then bid for it and however offers the lowest rate gets it.
In India, NoBroker and Grabhouse helps customers find a house or a flat mate without a broker.
The alliance of Ray White and Hipages (in Australia) connects homeowners to 70,000 tradesmen including builders, plumbers, electricians and painters.
Build-Next is a start-up from Kerala which offers end to end solution for all construction needs. It’s a web based platform that provides best offers in building materials at reasonable rates across India. Livspace is a Bangalore based home design start-up. It’s a technology platform where the client can select from a host of interior designers, contractors etc. Currently it covers Delhi, Bangalore and Mumbai. It results in faster turnaround of projects.
Smart Homes and IoT (The Internet of Things) Disrupting Real Estate Future
IoT is already shaking up the real estate industry at a building level. We now have home appliances, security cameras etc. which can be remotely controlled via the internet or through Wi-Fi. One can do energy management of their homes remotely. This concept can be expanded to neighbourhood level and district level as well under smart cities programs.
A recent survey revealed that 86 percent of millennials are willing to spend more money to rent a place with smart home technology already implemented. People are willing to spend more for smart home technology like smart thermostats, leak detection sensors and home security.
Big Data Analytics makes Real Estate Investing less Risky
Technology now makes it possible to create huge databases and then run analytics on them. Online real estate portals can analyse a user’s frequent search efforts and then can suggest the most likely options available.
If there were a record of all transactions – historic to recent ones at one place then one could run various analytics on it to understand real estate price trends, do quick valuations etc.
Big data is changing the way real-estate professionals, buyers, sellers and banks think about
transactions involving property. As a result of big data, real estate investing is no longer plagued by a high level of risk. Crowdsourcing and open data are gaining traction across the globe and are expected to bring forth seismic shifts in many business sectors including the real estate.
Some of the Data analytics platforms used globally include Rentlytics which offers greater transparency in management of portfolios and individual assets, Nestio, Online Residential (OLR), Dotloop, Homeshop, and Agentdesks etc.
Energy consumption in various types of buildings in different climate zones can be listed and benchmarked and efficiency improvements be worked around them.
At city level Big data analytics makes it possible to study the traffic flow characteristics at various times of the day real-time and predict key congestion points hence enabling mitigation by diverting traffic routes or managing through intelligent signalling control. The concept can be expanded further to cover other aspects such as crime and security, public amenities status and usage, energy supply etc.
At city level even healthcare issues can be better addressed if disease outbreak patterns can be mapped with data inputs from community and private clinics and hospitals. Usage of Big Data can be leveraged across several spectrum of urban development and the Smart cities program should make the most of it.
Real estate professionals are turning to Drone Photography
Drones have a huge scope in the real estate industry. More real estate professionals are turning to drone photography and videos to better market their listings. Equipped with high resolution cameras, drones can provide unprecedented aerial views of any property, be it land or built-up space. The perspective that they can provide is invaluable while understanding a micro-market and the potential of any given land parcel or building. They can be used for surveying and land mapping, or even for construction management and project monitoring.
They can be used to get beautiful flying shots which can be used to great advantage while marketing any property. The possibilities are vast. However, there are some caveats too. Legal permission is needed to fly a drone. Additionally there are issues such as privacy concerns from neighbours and the possibility of the drone crashing and harming people or property.
The traditional way of doing real estate business in India is making way for new concepts and business models. This sector will no longer remain insulated from the impact of the new age technological disruptions. The developers will need to adapt to meet the real requirements of the society and be agile to adapt new technologies. The real estate service providers will have to innovate their service offerings. Some of the current players may wind up or undergo consolidation or form strategic alliances. Technology and sustainability will be the key agents dictating change. In todays time it is necessary to speed up the application of innovative and disruptive technologies in real estate sector to get on with dynamic business needs and solutions.
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