It may look unsexy and unabashedly traditional at a glance, but the real estate industry should be making the startup ecosystem excited at the prospect for immense disruption. While most brick-and-mortar businesses have seen technology replace manual processes and sales channels, real estate developers and agents are still doing things very much the same as they have been for the past decades, like running big advertisements on print and outdoor media to raise awareness, getting buyers to bring along a cheque book to place a deposit, and signing on every page of a 30-page document.
Sure, this is not to say the industry hasn’t progressed with the times. The online real estate advertising business is increasingly competitive, with many portals fighting for a share of the agents’ advertising budget. Data analytics have also emerged as major players in the real estate tech space, promising to help industry players and consumers make informed decisions by looking at factors as diverse as land value, mortgage prices, rental yield, distance to offices, future land use in the vicinity etc. And new projects have been designed with built-in smart home technology, riding the wave of IOT innovation that has picked up momentum in recent years.
But much of this is a natural progression from applications developed by other industries and markets. Real estate is a unique market itself, in part due to the high-price, low-volume nature of transactions, and the fact that no two properties are alike. There’s so much more technology can bring to this market, beyond just advertising, analytics, and lifestyle.
Simplifying complexity of real estate transactions
In purchasing a resale private property, buyers need to consider:
- The valuation price of the property to calculate loan amount
- The buyer’s stamp duty and any additional stamp duty
- Citizenship for landed property purchases
- Purchasing the property with an existing tenancy arrangement in place
- Getting a bridging loan if the buyer is moving to a new home (sell-and-buy)
- Getting an option to purchase by putting down a deposit
- Sign the sales and purchase document on every page in duplicate
- Working with CPF to release funds for the downpayment and subsequent installments
- Engaging a lawyer to do the paperwork for the loan, the CPF funds, getting government grants, updating title deed, placing caveats and informing the authorities etc
Comparing this to buying some furniture from an online shop:
- Agree to the price of the furniture and any installment plans
- Click on purchase, put in credit card information
- Set delivery location and preferred delivery date
- Enjoy furniture within a month
To be clear, I’m not advocating for reducing due diligence or releasing control of real estate transactions to the open market. Instead, computers can get to work doing legal checks, getting necessary approvals, updating records and matching bankers, instead of relying on an agent or a lawyer making calls and running up and down collecting document signatures and then processing them manually. What takes a week or more now might actually be done in seconds, with the right queries to the right data sources, and with robust workflows for handling the compliance, legal and financial tracks of a transaction alongside each other.
But what this will require are the buy-ins from various industry stakeholders:
- Public APIs running between HDB, IRAS, URA and SLA to verify ownership and their eligibility to sell or purchase properties.
- A trusted mechanism to authorise, track and secure the transfer of large sums of money easily without writing a cheque, passing it on to the seller and having the seller bank it in.
- A means to manage CPF accounts as easily as using a mobile wallet application, with automated monitoring and restrictions in place to facilitate the downpayments and setting up monthly payments without opening it up for abuse.
- Online signatures that are enforceable by the Singapore legal system, maybe powered by our own trusted Singpass authentication system.
Perhaps all these may seem to be a huge risk to let automated systems handle. Surely a human is needed to manually vet through a million-dollar transaction, just to be sure? PayPal paved the way in taking on similar financial problems a decade ago, albeit for small purchases, by facing off conventional wisdom and critics who would gleefully claim that the unregulated and chaotic ‘internet’ was a dangerous place to trade money for goods. In some sense, because they pioneered fund transfers for the mass market, we have a whole industry of cybersecurity and fintechs now the ecosystem safer and more efficient.
There are several headstarts in this area. Some startups use e-contracts for property transactions, while others working to find novel ways to make fund transfers happen without going through credit card processors, like through the FAST network or using bitcoins. For myself, I co-founded Krib to help consumers and agents conduct due diligence and generate digital tenancy agreements for rentals. These startups will all eventually work to simplify property transactions, by connecting to each other through internal APIs, or as part of a massive SAAS solution.
The end goal is the same — to make property transactions simpler to the consumer, and to make it happen faster and more efficiently.
So here’s to disrupting the unsexy bits of an unsexy industry. It’s a brave new world to conquer out there.
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