Solving ‘Enigma’ of Real Estate with PropTech
Real Estate returns in different categories are being questioned hard with changing consumer behaviour and new business cycles around us since 2020.
The new investment class of millennials has first line of preference to invest in Liquid assets while staying away from using Real Estate as Investment (there is still action in doing Real Estate Spend to live)
The confidence of buyers/investors in Real Estate has to be inculcated by driving Real Estate on a Balance Sheet basis.
The way folks analyse company balance sheets to decide on investment class,real estate investments should be done in same fashion.
Majority industry sectors have a long history of technology creating new business modals and solving complex problems of profit generation,Real Estate has been running late on this.
Two generation of Prop Tech (1.0 & 2.0) in last two decades has slowly increased role of technology in Real Estate.Hitting Prop Tech 3.0 now is the time where full spectrum of Technology is unlocking end-end value of Real Estate thus helping RE Balance Sheets go stronger.
Cheaper Hardware(sensors, mobile devices)+Open Source Application Stacks+5G Network has been key catalysts for Real Estate with Prop Tech Platforms come on horizon.
Today we are sitting on a great opportunity to solve some of the inhibitions of Real Estate Investment with Prop Tech .
Key Real Estate Issues and how Prop Tech can solve them
1) Physical asset which meets wear and tear over time :-As a Brick and Mortar product wear and tear hounds RE the day it is live on streets.Different RE Asset class has its own wear and tear speed.Facility Management engagement in large assets has been doing a decent job in reducing these wear and tears .While there are loads of boots on the ground to do it predicting the possible depreciation of asset over period of time and expense projection to handle these are not very solid.Advent of IOT in last 5 years have made facility management a great enabler to make asset profitable.Asset Maintenance by balancing great tenant experience and cost spends is becoming real with real time asset data.Not to forget smaller assets in Residential RE have not fully kicked off this.
2) Cash flow produced by a property asset is distorted by the lease contracts agreed with owner and tenants :-long leases bring confidence to investors while they miss the chance to apply the possible upside which may occur to property rental values with market changes.Lease Value Analytics using the real time data coming from different micro-markets engagement and lease values can be combined to put a decision-risk modal of exiting from a lease to get an upside in the asset.
3)Property Assets are heterogeneous assets generally these can not be easily diversified :-Brick and Mortar cannot be shaped to form something new without major cost spend.What can be definitely done is to use the space it provides to create better returns in same structure.Net Operating Income Modals for Real Estate investment can be very easily plotted with data available in Alternative Investment PropTech Platforms.Today we have these platform very well in action with different category of operators in Co-Living,Student Housing,Senior Living etc.
4)Leverage is used in vast majority of property transaction.This distorts the return and risk of property investment :-Large size of Real Estate both in both commercial and residential real estate has backing of a mortgage.The issue of identifying the rite mortgages and keep refinancing/re tuning on interest rates is something which today’s prop tech platforms can deliver.BlockChain led modals offering Fractional Ownership of commercial & residential assets are available with PropTech platforms of today.
5) Real Estate is time consuming and expensive to manage :- Engagement of professional prop tech platforms addressing the end-end spectrum of Discovery,Tenant Engagement to Asset Management is a great start.The headache of holding the asset with owners/investor involvement cuts down majorly with such platforms.Larger the size of Real Estate Investment more complex and time consuming it becomes.
If you are a Real Estate Investor/PropTech enthusiast/Investor who wants to talk future of PropTech and Real Estate you can write to me on sachinjoshi29@gmail.com
