Why Does Latin America and the Caribbean Need to Discuss About Proptech?
Our region has the highest share of city dwellers in the world. Considering the lack of transparency in contracts, high transaction costs, scarce mortgage financing, high landlord requirements, and other hurdles, it is not surprising that “property tech” or PropTech is taking off in LAC.
Real estate is the world’s largest asset class, valued at almost $300 trillion in 2017. It is largely fragmented, inefficient and with entrenched incumbents. Sooner or later, most industries with these features get disrupted, and the culprit is always “data”.
The vast amount of data being generated, analyzed and applied to real estate, is producing a digital transformation in the property sector. Information and communication technology (ICT) applications, fueled by data, help reduce information asymmetry, provide transparency, and overall contribute toward more efficient markets. In real estate, this trend is enabled by a wide array of converging technologies: mobile, broadband, cloud, big data, artificial intelligence (AI), Internet of Things (IoT), blockchain, 3D printing, and others.
Real estate has a complex lifecycle with several stages. These include land appraisal, acquisition and permits, construction, purchase, sales and leasing, refurbishment, investment and financing. To describe all the technology-enabled business models and tools that are transforming these different phases, the term “PropTech” (property + tech) has been recently coined; to some degree it’s still somewhat diffuse and expanding. At its core, PropTech embodies the transactional side of the property industry, and at its extremes touches on fintechs, construction technology and smart cities.
PropTech business models
Let’s face it, real estate transactions are painful. When we think of the digitization of real estate, we imagine an ideal world in which realtors, property managers, notaries and other intermediaries are cut out. However, when one talks to these rooted market players, Mark Twain’s famous quote always comes up: “The rumors of my death have been greatly exaggerated”. We agree.
Follow the proptech money
When the opportunity is good, smart money follows. PropTech has been attracting the attention of the savviest international and local investors. Among the most prolific is SoftBank, which has invested in WeWork, Opendoor, Compass, Clutter, View, Katerra and Fortress. In LAC, it recently made a $250 million investment in Quinto Andar, together with Dragoneer, Kaszek and others. Loft, on the other hand, has raised close to $90 million through heavyweights such as Andreesen Horowitz, Monashees, QED and Valor Capital. And last month, Flat and OpenCasa, two i-Buyers, raised equity and debt.
Development finance institutions are also starting to venture into the space, especially since adequate and affordable housing helps to diminish fragmentation and inequalities, which are key to the 2030 Agenda for Sustainable Development and the New Urban Agenda. Designing holistic urbanization models and encouraging innovative and inclusive financial solutions are also critical to SDG 11 (Sustainable Cities and Communities).
All indicators show the pace of innovation in the real estate value chain is accelerating. While rumors of traditional real estate players disappearing may be greatly exaggerated, it is also likely that your next property transaction will be smoother, cheaper and more digitized.■
Authors
Guillermo Mulville
Guillermo leads the Telecommunications, Media and Technology (TMT) Team at IDB Invest, which he joined in 2016. He is responsible for developing business strategies and plans, and for managing clients and structuring the transactions of the TMT sector in Latin America and the Caribbean. Before joining the IDB Group, he worked at the International Finance Corporation (IFC) for more than nine years, as Head of the TMT sector for Latin America and the Caribbean. He previously worked at ABN AMRO Bank for 12 years. He was Enron International’s Global Finance Manager for two years. He served as board member of Pan-African and Pan- American companies engaged in broadband and cell tower distribution and infrastructure, with portfolios in various countries in Latin America and the Caribbean. Guillermo earned a master’s degree in finance from Universidad del CEMA and a professional degree in business administration from Universidad de San Andrés (both in Argentina).
Juan G. Flores
Juan G. Flores is a Strategy, Planning and Innovation Officer at IDB-Invest’s Strategy and Development Department where he analyzes challenges and opportunities for the private sector, with emphasis on Telecommunications, Media and Technology, Manufacturing, and Gender and Diversity. Juan has 11 years of experience in originating, structuring and supervising projects at the IDB Group, and performed a special assignment as Transaction Management Officer at the European Investment Bank. Prior to the IDB Group, Juan was Financial Controller at KFC Group Ecuador, and Chief Financial Officer of KFC Venezuela. Juan is a Certified Public Accountant, holds a bachelor’s degree in Business Administration with a focus on Finance from Universidad Católica del Ecuador, and a Master’s degree in Finance from Kogod School of Business at American University.
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