PropTech is revolutionizing the real estate industry worldwide. This blog by Iqbal Institute of Policy Studies (IIPS) aims to present Pakistan’s real estate sector’s current situation and the unique challenges faced in the market. The concept of PropTech 3.0 will be expounded along with the impacts of adopting the new technologies in Pakistan. The blog also provides steps that can be taken to inculcate PropTech 3.0 in Pakistan’s real estate industry.
The global fourth industrial revolution is increasingly prompting countries like Pakistan to adopt the latest technologies for sustainable development in the future. Pakistan seeks to include itself as a key player in the developing world. The real estate sector in Pakistan enjoys strong local investor confidence and has recently seen an influx of foreign investments. However, the real estate sector’s potential remains unexplored, and a stagnant phase has been the prevalent trend. PropTech is increasingly emerging as the new shape of the real estate markets in Asia. The rise of technological innovations in real estate, construction, and finance has encouraged investors and other stakeholders to adopt new business models. These new technologies provide a smart and intelligent way to counter key challenges of transparency, fraud, and data management in the real estate industry. PropTech 3.0 becomes an essential factor in determining the success of Pakistan’s real estate industry. Therefore, Pakistan can revolutionize its real estate sector by adopting PropTech 3.0 technologies resulting in exponential growth and economic boom.
With an influx of foreign investments and growing positive sentiments in the market since 2017, the Pakistani real estate sector is highly promising. Pakistani’s believe land to be a safe investment, and demand is on the rise. According to a World Bank estimate, the size of a developing country’s real estate assets constitutes between 60 to 70 per cent of the country’s total wealth; applying these estimates to Pakistan, the size of the real estate sector would be around $300 to $400 billion (Atiq, 2020). Also, conservative estimates put the current housing backlog at 9 million units, increasing by 300,000 units annually because of unmet demand (Ahmed, 2020). This shows that even if demand is rising, the sector is seriously overlooked by government authorities and the current rate of development does not come close to filling the market gap. Therefore, the market requires modern solutions based on property-related technologies, which will enable more people to engage in the real estate market and boost the sector to achieve a more sustainable model of future development.
The real estate industry came to a resounding halt in 2017 when a bevvy of financial, economic, and political challenges marred the investor confidence. A lack of incentives, government policies to curb tax fraud, and political instability contributed to this stagnation. According to Shafiq Akbar, Chairman Imarat Group of Companies, CEO Graana.com, there is an urgent need to digitize real estate data and provide public access to consolidate scattered data and help people assess the real worth of assets (Ahmed, 2020). Lax regulation in the real estate sector and a frivolous litigation process of fraud cases is another major problem. As per the statistics of the Law and Justice Commission of Pakistan (LJCP), 38,539 cases are pending with the Supreme Court, 293,947 with the five high courts, and 1,869,886 cases with the subordinate judiciary of the four provinces and the federal capital (Asad, 2018). Inadequate legislation is also a significant setback for the industry. The Finance Act of 2016 caused an 85 per cent decrease in property transactions by limiting the number of people who can buy property above five million rupees (Ahmed, 2017).
Despite the gloomy outlook in the sector, there are encouraging indicators. Pakistan has witnessed a marked increase of over 70 per cent in the tourism industry during the year 2019 (Ahmed, 2020). The World Bank has also ranked Pakistan 108th globally in its “Doing Business 2020” report (Ahmed, 2020). An improved business environment attracts foreign direct investment. Digital vision Pakistan 2019, aiming to improve the digital infrastructure and promote innovation, will also help overseas Pakistanis waiting for the digitalization of governance and tax systems. Lastly, CPEC is another mammoth development project that will transform Pakistan’s economy, and resultantly, the real estate sector will boom in the coming years.
The word PropTech describes the wave of technological innovations that shape real estate markets worldwide. The term encapsulates several concepts rather than a singular trend. Short for ‘property technology,’ the complete phenomenon and application of technology in real estate. With the introduction of mass-market computing, mobile phones, and the internet, PropTech 1.0 was introduced to the real estate sector’s existing models. Firms quickly adapted and matured, resulting in the adoption of PropTech 2.0. The industry has now entered a new phase, bringing together elements from traditional real estate, FinTech, and Smart Real Estate. PropTech 3.0 brings all these elements together using technologies like Blockchain, Artificial Intelligence, and 5G communication. 3D printing of design models and interactive virtual tours of properties are also the hallmark of innovation in the field. Pakistan has a large youth population, and as more and more people become acquainted with newer technologies in Pakistan, the potential for a revolution in real estate is promising in the future.
There are four major areas where PropTech 3.0 can impact Pakistan’s real estate sector. Global businesses now look for sustainability as a standard. It is no longer a marketing issue but rather something which the market demands. Location, airflow, water availability, power, and transport are the primary considerations that must be made efficient and as environmentally friendly as possible. A smart building is any structure that automatically controls heating, ventilation, air conditioning, lighting, security, and other systems. This infrastructure helps to improve asset reliability and minimizes the environmental impact of buildings. You can reduce a building’s energy consumption by around 5 per cent to 35 per cent using smart technology (Bell, 2019). PropTech 3.0 is the way to incorporate all these technologies in assets to make them more sustainable.
Administrative management is key to the smooth running of the real estate business. By removing much of the paperwork from the equation, the buying and selling process can dramatically be sped up. Greater transparency can be achieved as data will be highly accessible over a broad user base. It also affects the process of legal tasks being carried out. Blockchain technology allows the execution of smart contracts that bring transactions to a conclusion more efficiently.
Consumers are more tech-savvy than ever before. Pakistan, which has about 60 per cent of its 200 million population in the 15 to 29 age group, represents an enormous human and knowledge capital. Pakistan has more than 2000 IT companies, and the number is growing every year (Prime Ministers Office Board of Investment). Using 3D printed models to manipulate consumer interest is a vital asset in real estate. Interactive virtual tours of properties allow agents to bypass travel restrictions and time constraints, allowing a greater audience to engage in real estate investments and streamline the process. Many users can also view the same property at the same time.
Pakistan has taken vital steps that make the application of PropTech 3.0 much more viable in the country. The Digital Pakistan policy aims to provide a digital ecosystem on the ground to enhance connectivity, improve digital infrastructure, increase digital skills investment, promote innovation and tech entrepreneurship. Under Pakistan Vision 2025 and the Digital policy of Pakistan 2018, the ICT industry size is targeted to reach $20 billion by 2025 (Prime Ministers Office Board of Investment). Therefore, PropTech 3.0 revolution can establish itself in the real estate sector with relative ease.
The local ecosystem in Pakistan is faring in terms of innovation. Companies like Graana.com are already setting high standards for PropTech based real estate ventures. The company’s success in establishing itself in a widely traditional market speaks volumes for the potential of PropTech in Pakistan. A large consumer base, along with a nascent digital entrepreneurship landscape and not many international players, makes Pakistan an excellent place for investments, said Riyad Abu Jaoudeh of Middle East Venture Partners (MEVP) (Jajja & Khan, 2018). Therefore, PropTech 3.0 is not new to the already booming market and investor interest.
To educate students in Pakistan on new technologies, the President of Pakistan, Dr. Arif Alvi, launched the Presidential Initiative for Artificial Intelligence and Computing (PIAIC). The initiative provides free courses in Artificial Intelligence, Blockchain, Cloud computing, and the Internet of things. The initiative also focuses on the inclusion of women in the realm of technology. This provides a base for innovation and the introduction of smart technologies in the real estate sector. As the sector is growing annually, it is hoped that smart technologies like the internet of things will allow Pakistan to establish smarter and more efficient real estate assets based on smart solutions.
Lastly, the China-Pakistan Economic Corridor (CPEC) aims to exchange newer technologies between China and Pakistan. As a large portion of the investment lies in the development of infrastructure in Pakistan, the application of PropTech 3.0 will radically reduce cost and energy loss. Therefore, the PropTech 3.0 revolution can easily establish itself in Pakistan’s real estate sector.
The PropTech 3.0 revolution is likely to impact Pakistan positively. Looking at Pakistan’s current technological development rate, it is not far that cryptocurrencies are used to buy and sell houses. Not only that, but shared living will allow for efficiency and sustainability at work and home life as both can be incorporated at the same place. Smart buildings will continue to develop over time, and new avenues for investments will be generated. PropTech has been building such mass and momentum that it will change the world – maybe not as fast as the millennials think, but quicker than is comfortable for the conservatives.
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