PropTech, also known as real estate technology, is focused on the automation of processes in the transactions and processes of real estate, as well as home automation. This particular subset of technology has been taking off in recent years with approximately USD380 million invested in Southeast Asian proptech or real estate technology in 2018. Big moves are being made in this sector – the recent merger between real estate listing portals 99.co and REA Group (iProperty in Malaysia and Rumah123 in Indonesia), and PropertyGuru’s IPO tease. Real estate technology is especially ripe for growth in Singapore and the Asian region thanks to the multiple smart city initiatives across Asia, the huge REIT listings in APAC and the increasing trend of deregulation and acceptance of technology.
Let’s look at 4 broad categories in the real estate technology space:
Property Marketplace Technology
Platforms that list available properties in the market as well as provide brokering services to match buyers and sellers. These firms can operate in either the B2C residential or B2B commercial real estate sectors. Players in this category face the difficult task of competing with industry leaders like PropertyGuru.com and the recently merged 99.co and REA Group.
The main driver for growth in this category will be the differing migration trends across the region. In fast-growing markets like China and India, locals are increasingly migrating from rural to urban cities, driving demand for property purchasing and rental. As these cities begin to develop, expats will naturally be attracted to the business opportunities available, further increasing activity in the property market. Another differentiator in this sector is the provision of supplementary services, with players like Ohmyhome in Singapore and Rever in Vietnam featuring online services like agent services, legal assistance and mortgage planning on their platform.
Real Estate Management
Technology companies that provide property and lease management platforms. US-based company VTS has made huge steps in this category, their latest valuation going past the US$1 billion mark and attaining the fabled unicorn status. The success of VTS in the US can be replicated here in Asia, given the significant number of REITs with sizeable real estate portfolios. These REITs would benefit greatly from the automation and cost efficiency provided by these management platforms. Existing companies like Yardi and RealEstateDoc (RED) (both based in Singapore) will be able to realise their untapped potential through strategic partnerships made with developers and REITs in the region.
Through large, subscription-based B2B contracts with REITs and property developers, companies that provide management services can enjoy strong recurring profits. However, due to the cumbersome (and sometimes costly) processes of legacy system migration and maintenance, property owners and management firms will typically only engage these companies if they believe that the underlying property is a sufficiently valuable investment.
Real Estate Investing
The intersection of real estate and financial technology, these services usually come in the form of real estate crowd-investing through debt or equity. As the stringent regulations on crowdfunding ease up, the door for real estate investing technology opens. In Singapore, MAS introduced greater leniency to crowdfunding platforms. These platforms can now raise up to S$5m within 12 months without the need for a prospectus with a base capital requirement of S$50,000 (reduced from $250,000) and are no longer required to make a S$100,000 security deposit.
As a frontrunner in financial technology, many countries look to Singapore for guidance on regulation. Once crowdfunding deregulation proliferates the rest of Asia, real estate investing platforms like blockchain-based BitofProperty, Sharia-compliant Ethis and Singapore-based InvestaX will have the freedom to flourish.
Smart Building Technology
With the recent wave of governments in Asia committing to the development of smart cities (China and India have set aside funds for over a thousand smart city projects each), proptech is now at the forefront of civil infrastructure development as governments begin looking for smart building technology that focus on resource-sharing platforms and services, optimising city planning, data on building usage and wifi-connected devices, more popularly known as the Internet of Things (IoT).
As the smart city initiatives charge forward, proptech startups that can potentially contribute to the development of this front are getting attention from both private and public sector investors.
The outlook on real estate technology is generally bullish, with many claiming that proptech is surpassing fintech as the hottest technology for venture investors. Overall, this sector holds much promise. We are excited to see how it will develop in time to come.