Role of emerging technologies in the real estate sector

Abstract

Real Estate Industry has so far not seen any disruption in the past because of technology. Even while other industries around it saw new business models emerge and technology driving changes, this industry has so far been insulated. The next leg of technological innovations, however, will impact the real estate industry the most. Through this paper, we examine technologies that will change the real estate industry. We traverse the whole value chain for the industry right from building to financing a property by a customer. Every step of the value chain has different technology driving innovation. From drones and GPS based technology in building a property to IoT in managing commercial properties, there is a wide variety of technologies at every stage. The report further analyses different use cases of technologies in the real estate industry. Starting with AR technology, which has the potential to be a significant contributor to change in customer experience and use of AR would be a big leap from the current standards of client outreach for real estate companies. We list out multiple use-cases for the use of this technology. VR is a better technology in terms of customer experience, but unlike AR, it is restricted to specific hardware. AR can be used directly via a mobile phone whose infrastructure is widely available, but VR needs a specific device which is still under-penetrated in the general population. Therefore, real estate companies are setting up in-house infrastructure at their offices which allows them to manage customer demand of home-visit without the need for an actual visit. Next, we analyze algorithm-based technologies such as AI and Big Data. The primary use case for these technologies is in better customer targeting. These are information-driven technologies, and their need is more on pricing, lead generation and efficient targeting. Big data and AI also improve existing processes by making them efficient such as making the experience better for a customer looking for a property by getting to know the customer better. IoT has been in use in the commercial real estate industry for quite some time now, and its most significant use-case still lies in efficiency in terms of energy management and providing data to make energy decisions faster. IoT is also instrumental in building smart workspaces and with workspace shifting to houses due to COVID, IOT might see significant adoption by residential customers too. Blockchain, although very nascent and exploratory in nature can be a source of disruptive change in the real estate industry. The report examines a very interesting use-case for Blockchain, as to how it can be used to provide more liquidity for real Estate as an asset class. With Blockchain, real estate properties can be tokenized and can easily be traded just like an equity asset class. We suggest through this report that while other industries have been driven mostly by software technologies, the real estate industry across its value chain needs a very wide variety of hardware and software-based technology. Every step of the value chain has companies which are leveraging these technologies and bringing about a change in process and the products too. It is the hardware aspect of this industry which creates barriers to entry for new players. This is also leading to slow adoption of the technologies in the industry. We highlight AR as the near-future technology, which will significantly change how companies reach their customers. Other information and algorithm-based technologies are already deep in the sector and will increase efficiency levels for real estate companies. IoT as the technology could see traction in residential real Estate because of COVID and a shift to home-based workspaces. VR technology, although superior, has its limitations of infrastructure and hence will see a slow adoption in the near future. There is hope for Blockchain, but it is a very wild bet for the industry. For the near future, AR would be the next leg of innovation in the industry. Companies investing in these technologies would do well to improve their processes and connect better with their customers.