The building and construction sector is of key importance to the development of Africa and the wellbeing of its population, as a result, the process of planning, constructing and maintaining a building must be intensive to meet up with the needs of the digital generation.
Within the African property market, customers are becoming more sophisticated and their needs are growing beyond the standard brick and mortar services which are status quo. Instead, they are keen on memorable technology, infused experiences, similar to those being created in other industries such as financial services (FinTech).
Within the property and real estate industry, change is rife and the name of that change is Proptech.
What is Proptech?
Proptech is the digital transformation of the property industry. It is the application of information technology and platform economics to real estate markets. Proptech has two domains which are Residential Property Tech and Commercial Real Estate (CRE) technology.
Residential Property Tech is all the digital products developed by real estate tech companies. It aims to facilitate the way people own or rent apartments and houses, like short-term rental platforms or AirBnB while CRETech covers all the innovative tools companies and individual CRE professionals use to efficiently run, search, rent, sell offices, industrial, and retail property assets.
Proptech in Africa
The proptech movement is remarkably getting a face-lift in Africa. According to latest estimates, there are more than 200 Proptech companies in Nigeria, South Africa and Kenya alone. Other countries such as Botswana, Rwanda, Uganda, Tanzania and Ghana are also witnessing significant growth.
For everyone in the African real estate industry—builders, developers, owners, renters, agents, and more—they can expect everything to be bigger, better, faster, and cheaper; wherever they turn, and in just about everything they do. On top of that, consumers want everything at their fingertips; it’s almost expected in the current climate, and with the least amount of fuss and stress possible. Players in real estate markets across the African continent are becoming increasingly aware of the role that proptech can play.
According to Modor Intelligence, a market research company, the African construction market is expected to grow by 6.4% between 2019 – 2024. The speed and scale of development required to meet the population expansion could prove challenging. For PropTech entrepreneurs, technology can both help create efficiency within the construction process, as well as solving other issues such as land ownership, and creating transparency within the real estate industry.
According to the founder of the Africa Proptech Forum, Kfir Rusin, Proptech is gradually getting a shape in the African real estate market. Africa’s Property Technology sector is coming up and is a key component of future strategies for local REITs, operators and others looking to future proof their real estate businesses as well as VCs looking to invest in early-stage start-ups and opportunities.
Tech entrepreneurs in Africa have long complained about the preference of local investors to put their cash into land and property, but prop-tech start-ups can pull off the feat of marrying the two.
Critically, leading global real estate companies such as JLL, CBRE and others, have been taking active positions in either developing their own technologies, directly investing in PropTech companies or providing research and services for the PropTech industry.
Benefits of Poptech to African Real Estate Growth
PropTech creates value; it doesn’t just achieve efficiencies and cost-savings but also promotes healthy and sustainable workplaces. PropTech describes a movement and shift in mentality within the real estate industry to begin looking to technology-driven innovation in data assembly, transactions and the design of buildings and cities as the way of the future. PropTech creates value that not only achieves efficiencies and cost-savings but also promotes healthy and sustainable workplaces.
Retrofits: Often, retrofits involve modifications to existing buildings that aim to improve energy efficiency and/or decrease energy demand, thereby increasing cost savings and lowering emissions. Retrofits also provide an opportunity to install distributed generation to a building. These efforts reduce the operational costs, particularly in older buildings, as well as help attract new tenants and gain a market edge.
Environmental, Social and Governance (ESG): PropTech will be an important tool in helping the commercial real estate industry meet the needs for sustainability, as the importance of ESG issues intensifies for owners, investors, lenders and other stakeholders.
Smart buildings: Smart buildings describe technology-based platforms that facilitate the operation and management of real estate assets. This technology may provide information on building or urban centre performance, or directly facilitate or control building services.
Intensifying Technological Revolution
The recent levels of investment demonstrate a very clear upward trend which indicates growing confidence in the current and future potential of proptech. While these figures may still be a small portion of overall start-up or tech investment, the positive trajectory of proptech is undeniable. It should be noted that there are a number of reliable sources for global proptech funding whose data is not often correlative. This is due to the challenge of recording investment that contains a large amount of private activity that is difficult to track and record.
Despite the significance and importance that proptech can provide, it will also require the African real estate community to push for its adoption and invest in its development. Only then will we be able to fully utilize it to help the sector leapfrog over its historical and most pressing issues.
To encourage and harness the power of PropTech requires that we maintain innovation and create new ways of offering real estate services.
By Noah Ibrahim