Over the years, the economic performance of Nigerian Real Estate industry has consistently fluctuated. Following the 2016 -2017 economic recession and the ensuing financial crisis, the real estate market suffered a big hit and this was discernible in its total contribution to the GDP during these years. During the second quarter of 2017, the Nigerian Bureau of statistics (NBS) recorded a 0.77% increase in the country’s real GDP which was an improvement compared to the negative figures that were previously recorded.1 The real estate industry used to be the fifth largest contributor to the GDP, but as the Nigerian economy grew, the real estate industry’s contribution dwindled. The sector ended 2017 with a -5.92% contribution to the country’s GDP; a significant drop from the -3.1% recorded in the 1st quarter of that same year.2 Today, Q1 remains the worst period, eclipsing the previously lowest return in history recorded during the 2016 recession.3
Nigeria’s real estate sector also faces housing deficit issues despite the erection of edifices such as houses, malls, skyscrapers and hotels in Lagos and some other states. Nigeria is projected to build about 700,000 units every year compared to the meagre 100,000 units we build annually which cannot salvage the situation of housing deficit the country faces.4
Real estate meanwhile continues to enjoy sustained relevance. It encompasses almost every aspect of human life, ranging from his habitation to survival. As long as the Earth remains the prime habitat of life and humans especially, the concept of real estate would continue to thrive. Would you just imagine a world without lands and buildings!
The real estate industry encapsulates the development, trading, marketing and investment in real properties. Real properties are simply lands/landed properties.
Real estate may be defined as:
“Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings, or housing.”5
It generally refers to land, properties and buildings in its best physical form. Following this comprehensive definition, it is no gainsaying that its relevance is crucial to human existence. Real estate has its residential, commercial and industrial perspectives.
EMERGENCE OF PROPTECH IN NIGERIA
Many structures have been put in place to facilitate the revolution of the real estate sector and proffer solutions to the myriad of problems facing the sector. Prominent among these structures is the PropTech phenomenon.
PropTech (also referred to as Property Technology or Real Estate Technology) is the acronym used to describe any technology, usually of a digital nature, deployed for the real estate space. Proptech seeks to address real estate or property industry issues. Although PropTech has not gained widespread adaptability and use in Nigeria compared to FinTech, there are certainly some positive signs.
The size of the real estate industry valued at $217 trillion globally in 2015 is what makes PropTech so attractive. Every residential and commercial building creates an opportunity to leverage PropTech solutions and services.
Abdulhakeem Sadiq, the founder and chief executive officer of new real estate market entrant, ZAMA7 remarked:
“Proptech is slowly gaining momentum in developed markets, and we feel a developing market like Nigeria can learn and re-calibrate itself for seasoned investors.”8
The possibility of PropTech taking over the real industry has never been more pronounced than now. With the ever-increasing rate of internet usage and participation, this high possibility cannot be surprising. Nigeria has the highest number of internet users in Africa with the number internet users in Nigeria increasing marginally to reach over 111.6 million in December 2018.9
THE ADOPTION OF PROPTECH
The demands of investors and stakeholders in the real estate industry has become more sophisticated in recent times, making the need for innovation and technology very key in the operationalization of the industry in our contemporary society. As earlier stated, PropTech has not being fully adopted and operational in the Nigerian real estate industry. It must be noted that the closest adoption Proptech has experienced so far in Nigeria is in the area of private property-listing websites and rental payments such as PropertyPro.ng, Land.ng, Hutbay, ToLet.com.ng, KoboRent and Fibre.ng. These private websites are meanwhile, predominantly operational in Lagos. They constitute the most viable and available online portals for landlords or agents to advertise properties for sale, lease or rent.
Countries such as US, UK, Japan, Korea, China, amongst others have adopted PropTech and are reaping its dividends on a large scale. In recent PropTech news, a leading accommodation platform Yanolja which is predicted to join the unicorn club in a few years is going global by offering its users hotel bookings not only in Korea but also in the America, Europe, Japan, China, and Southeast Asia.10 Proptech Korea will soon become the largest PropTech community in Korea to help accelerate the adoption of technology to build better buildings and smarter cities.11
In the UK, there are many startups using various technologies to transform the property market in different ways such as buying and selling, renting, and investment. One of the startups which is known as Goodlord improve the ways renters, estate agents and landlords transact through a suite of tools on its cloud-based technology platform.
In China, PropTech has been fully adopted, cities such as Singapore and Hong Kong have made Building Information Modelling (BIM) mandatory for public projects and it is fully operational.
With the increased number of mobile phone users and routers in Nigeria, one could easily conclude that PropTech has found its natural habitat. However, the converse is the case. Hopefully, when PropTech gains its feet in the industry, Artificial Intelligence and Virtual Real Estates Agents who are also potential real estate problem solvers would engulf the industry.
The need for technologies such as AI and Proptech are traceable to the use of data and algorithms. The technologies providing this data are interlinked and cannot work in isolation. A removal of any of its constituent parts ensures that the efficiency of the others is becomes questionable.
PROPTECH AND INTERNET OF THINGS (IOT)
IoT has emerged as one of the most prominent innovations of the technological ecosystem. IoT consists of web-enabled smart devices that use embedded processors, sensors and communication hardware to collect, send and act on data they acquire from their environments. It is a giant network connecting different things and people. The acquired data and information from the sensors are used by PropTech to drive its operational efficiency. Examples of this includes the use of Artificial Intelligence (AI) and Block Chain (Tokenization) to bring major improvements to the real estate industry through the use of predictive analysis and streamlining of government land registry services respectively.
NOTABLE IMPACTS OF PROPTECH
As one of the biggest technologies of the 21st century, the emergence and steady adoption of PropTech has led to the establishment of PropTech companies in certain parts of the globe, specialized in providing world class PropTech services. Its impacts in the real estate industry cannot be overlooked.
According to Wayne Berger, Managing Partner of iShack Ventures and a PropTech Venture Builder:
“Exponential technologies are those which are rapidly accelerating and massively impacting major industries and, if not already, then will in the future, very likely touch all aspects of our lives.”
“Several of these technologies are already influencing the industry to varying degrees, but there a number of key emergent trends that are likely to have a significant impact within the next few years.”12
Some significant impacts of PropTech are highlighted below:
The real estate industry involves consistent transactions between buyers and sellers. PropTech has therefore created data to facilitate connections between them, thereby improving the efficiency of the industry. It has upgraded the system so much that connecting with people has become so easy, bringing the needs of potential investors to their fingertips and also bringing sellers closer to buyers by suggesting actual or potentially interested parties. This connection is made effective through its ardent use of data and algorithms. Although most realtors have engaged the use of social media for marketing properties, its inherent shortcomings in terms of connecting realtors effectively to the right people has led to the emergence of PropTech.
The primary goal of big data in the real estate industry is to automate dataset analysis from multiple sources. It generates numerous options for buyers to pick the most suitable from as a result of the accumulated data from many sources and also provides the sellers with data analysis of the needs of investors and why they are not interested in their properties.
Furthermore, big data also reduces financial risks in the industry as it provides sufficient data as regards building conditions, year of construction, current owner information. The data provided affords investors to avoid financial risks in the event they invest in the properties and it dilapidates. It also makes owners of the vulnerable buildings aware of the impending disasters or damage to their properties and efficiently manages them.
Technology is moving at rocket speed. The days of building houses and erecting structures for donkey years are a thing of the past. The rest, they say, is history! The revolution technology has caused has dawned on all of us and this calls for active response to its stimulus from all angles of the universe. Nigeria is no exception. In March 2017, Apis Cor, 3D-printing specialists with offices in Russia and San Francisco, announced they had produced a 3D-printed home in just 24 hours.13
The technology of 3D printing is no more alien to us as the reality of choosing a site for building our homes with the use of printer and raw materials is crystal. Before you a blink of the eye, your home is set in just a single day! It is real and its affordability is also mind-blowing as many would think this kind of huge technology would be outrageously expensive. This may sound extremely unrealistic. But watch it. It just might be your area of specialization soon.14
One of the most efficient tools of marketing in the real estate industry is pictures or images as it affords the most possible visibility and representation of available properties.
Over the years, pictures of properties have been taken from close range and it has served some benefits. However, the advent of technology has brought the use of drones to fore. PropTech has incorporated the use of drones in the industry to improve its marketing strategy. Pictures of properties are now taken from distant aerial ranges for the visibility of some hidden features of the property and its genuine beauty thereby making it more appealing to prospective investors.
Furthermore, the advent of drone technology certainly reduces the need for on-site labor, saving costs and improving safety. Both high risk and mission critical jobs – such as inspecting scaffolding and cranes – can be undertaken by a drone, thus delivering huge safety upgrades.15
“Consideration” which is otherwise known as “price” (not always in monetary terms) is very pertinent in real estate industry as the industry is investment and profitability driven. The issue of setting price (money consideration) based on the standard of a property, the number of years it has been in existence, its appreciation value, location, and encumbrances continues to pose serious controversies in the industry.
The emergence of PropTech has efficiently tackled this issue with its use of data and algorithm facilities just like AI. These facilities enables PropTech to make accurate and acceptable predictions about the price that befits each property based on the factors listed above and certain other factors. It also provides predictive analysis that can proffer solutions to certain problems and challenges that real property customers encounter.
It is no news that the digital economy is here. It is taking over. The prevalent challenge incidental to the activity of scanning documents and verification has been eliminated. Documents scanning and verification are undergoing automated. Also recently, the archaic modes of constructing buildings are fast changing with the advent of PropTech. One of the latest trends of building is the use of Building Information Modelling (BIM) which involves the use of information provided by data and digital means to improve building projects. BIM operates in four crucial stages, which are: concept design, detail design, manufacture and construction and the last stage which is operation and maintenance. BIM is seen as another aspect where PropTech has influenced the real estate industry by the automation of its construction department. Just like the 3D-printing module, it speeds up construction process.
Actors in the real estate industry are fully aware of what Inspection entails. The efficacy of inspection cannot be overemphasized as it gives leverage to both the buyer and the seller. The buyer has the choice to pull out of negotiations when he discovers patent defects in the property during inspection. The seller also has the opportunity of making the prospective buyer see further reasons why the property he markets is the most suitable one. However, as important as inspection is, the busy schedule of some investors predisposes them to serious challenges. They may end up conducting a grossly insufficient inspection.
This factor has also prompted the emergence of PropTech as it now affords such investors the technological advantage of effectively inspecting the property by Virtual or digital means. With the use of a computer or even a mobile phone, inspections can be efficiently carried out anywhere. One of the virtual platforms for inspection is known as Ghar360.16
Hardly does any technology emerge without having its peculiar challenges strapped to its back. PropTech as one of the recent technologies is also left out in this context. As scintillating as the technology appears, it has certain challenges.
The major challenges peculiar to most of the 21st century technologies is data protection and the tendency of cyber-attacks. As earlier emphasized, it is almost impossible for PropTech to actively function without data. The technology has been programmed to garner data from different sources as to provide the exact supply to the needs of actors in the industry and automatically learn. This technology sometimes goes as far as infringing on the personal information of citizens just to facilitate the accuracy of solutions provided whenever it is consulted. The government can proffer solution to this by making more legislations circumventing this issue and back it up with sufficient sanctions and enforcement. PropTech companies should also employ specialist that can go around reasonable generation of data, keeping an eye on data protection, and comply strictly with legal stipulations.
Another challenge PropTech is facing is that there has not been a full blown acceptability and adaptability in Nigeria and this can be traced to the fact that there is no sufficient awareness for its use and benefits. There has also not being any government policy to facilitate its enforcement in Nigeria. When there are established policies by the government to assimilate the full adoption of PropTech in the real estate industry, members of the public and actors in the industry will make use of the technology.
The fact remains that Artificial Intelligence in terms of FinTech, InsurTech, PropTech and others technological creatures are fast moving and taking over. Without proper care and awareness, a lot of static and anti-change players in concerned industries will be swept away by the floodgates of these technologies. Experimental analyses of robots and humans have shown that robots can tackle and proffer solutions to problems faster and more accurately than humans. This further shows that PropTech is also seen as a potential threat to realtors or real estate agents as they feel threatened that the emergence and adoption of PropTech will make their profession and means of livelihood dwindle and even vanish into extinction.
This issue has further discouraged the awareness and adoption of the technology as it is seen as being more of a curse or epidemic to humanity than a blessing. The positive however is that PropTech works better with the presence of humans as against the baseless assumptions of real estate actors especially realtors. For instance, as a realtor, the technology improves the standard of services rendered as it speeds up marketing and due diligence processes with less manual input.
Realtors must be ready to embrace PropTech, learn the requisite skills to maximize the technology and leverage on human decision making ability as their advantage over robots. PropTech deserves our ovation and warm embrace. If we decline, it would necessarily burgle our defences and come to stay.
1. Nigeria Bureau of Statistics (NBS) Report (2017) (Online). Available at: http://equinoxrealty.com.ng/report-analysis-of-real-estate-market-contribution-to-nigerias-gdp-in-q1-2018/ (Accessed: 23 April 2019)
4. Jemimah A. (2018) (online). Available at: https://www.propertypro.ng/blog/nbrri-faults-17m-housing-units-deficit/ (Accessed: 23 April 2019)
5. “Real estate”: Oxford English Dictionary online: Available at: https://en.wikipedia.org/wiki/Real_estate (Accessed: 23 April 2019)
6. Fortune (2015) (online). Available at: https://www.linkedin.com/pulse/proptech-next-buzzword-opportunity-charles-reed-anderson. (Accessed: 23 April 2019)
7. ZAMA: Property listings site in Nigeria with market Insights and neighborhood guides; Abdulhakeem S. (2018) (online). Available at: https://investadvocate.com.ng/2018/11/12/proptech-drive-residential-growth-nigeria/ (Accessed: 23 April 2019)
8. Vanguard (2018) (online) Available at: https://allafrica.com/stories/201805220177.html (Accessed: 23 April 2019)
9. Nigerian Communications Commission.
10. Tsatsral Baatar (2019) PropTech Korea making its mark (Online) Available at: https://www.unissu.com/proptech-resources/proptech-korea-making-its-mark (Accessed: 23 April 2019)
12. Wayne B. (online) Available at: https://propertywheel.co.za/2019/01/how-proptech-will-impact-the-real-estate-industry/ (Accessed: 23 April 2019)
13. Saurav B. (2019) (online) Available at: https://www.viainsider.com/3d-printing-in-construction/ (Accessed: 23 April 2019)
15. Holtby T. (online) Available at: https://www.holtbyturner.co.uk/wp-content/uploads/2017/10/A-Brave-New-World-Innovating-Real-Estate.pdf (Accessed: 23 April 2019)
16. Holtby T. (online) Available at: https://www.holtbyturner.co.uk/wp-content/uploads/2017/10/A-Brave-New-World-Innovating-Real-Estate.pdf (Accessed: 23 April 2019)
Ayotomiwa P. Olufunso Esq.
Ayotomiwa is a legal practitioner in Lagos, he graduated from Obafemi Awolowo University. He is currently serving as an Associate and company secretary in the legal department of Diamond PFC.
He has special interest in corporate law and and real estate. He is passionate about learning and making impact in the legal community. He is an unrepentant Chelsea fan and has an undying love for good music.