How is Proptech Transforming the Real Estate Market in MENA?

PropTech Outlook | Saturday, April 01, 2023

Governments and organizations are building smart cities and buildings in the MENA area, which has accelerated the development of PropTech companies.

FREMONT, CA: Currently, MENA is one of the most promising regions for proptech in the world. The Middle East and North African real estate markets, particularly those in the UAE and Saudi Arabia, are still in the early stages of digitalization. Because of this, it takes a lot of time and effort to complete a real estate transaction there. By gathering and analyzing vast amounts of market data and creating estimates for future growth and possible ROI within seconds rather than weeks, several proptech startups can notably simplify this process.

To encourage more investors to the market, MENA's real estate markets must improve transparency. In recent years, some communities have already made major advancements in this area. For instance, the Global Real Estate Transparency Index (GRETI’ transparent')'s tier was first attained by Dubai's real estate market last year. The Emirate moved up three spots in the index to take over the 31st spot overall, and it is now the only real estate market in MENA to be included in the "transparent" tier.

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The MENA region's governments are eager to increase digitalization. Saudi Arabia, with an economy nearly twice as large as the United Arab Emirates in the Arab world, wants to take the lead in this arena. Saudi Arabia announced more than $6.4 billion in investments in entrepreneurship and emerging technology last year. That will enable it to maintain its targeted position as the region's digital transformation leader. Saudi Arabia experiences some of the largest scales of construction in real estate.

In this region, foreign investments are highly accepted due to ambitious and money-consuming plans. To illustrate, Saudi Arabia wants to earn SR388 billion (roughly $90 million) annually and more than double the amount of foreign direct investment coming in over the next ten years. Additionally, it eases its regulations on visas for foreign nationals.

Investment and Venture Markets Boom

In the MENA, numerous private and governmental funds, family offices, and angel investors are now eager to invest in innovative concepts. This pattern contrasts the USA, Europe, and China, where financing and deals dropped due to higher interest rates and recession fears.

As an example, Saudi Arabian startups received US$987 million in funding across 144 deals, a 72 percent increase in funding volume from 2021. A record-high 104 investors engaged in deals closed by Saudi startups in 2022, up 30 percent compared to 2021. Saudi Arabia also recorded double the number of exits in 2022 in contrast to 2021.

Proptech is also growing in prominence. Some funds only invest in companies that are creating cutting-edge technologies based on AI, 3D, and so on. For instance, a Saudi financial company, launched a $26.7 million (SAR 100 million) venture capital fund last year to invest in international, scalable startups using technology in the booming real estate sector.

AI is Leading in MENA

The Middle East real estate market is predicted to grow by up to 111 percent over the next five years. As technologies raise the most important problems in local markets, they will eventually become the main driver of growth. The Middle East and North Africa's real estate markets will be shaped by many property innovations, such as virtual reality. But artificial intelligence (AI), a technology that is presently gaining traction, will play the most significant role in the region's economy.

By 2030, the MENA region's annual growth in AI's economic contribution is anticipated to hit 20-34 percent, with the UAE and Saudi Arabia experiencing the highest rates. More than US$320 billion will be earned by these two nations alone. This possibility derives primarily from cost savings brought about by automating procedures and enhancing goods and services across all sectors of the region’s industries.

Self-service Solutions

Consumers today are selective. They are accustomed to receiving services with just one click owing to the enormous technological advancements across many sectors. Ordering food and a taxi, purchasing a plane ticket, and sending money between friends are all easy processes. However, it is still difficult when it comes to land. That is why self-service options are available in abundance. Customers can choose and reserve real estate directly from a developer using a website or an app, avoiding the need to work with a realtor. In addition, customers can now purchase an estate online without having to view a specific apartment.

The number of self-service alternatives is increasing, and a category of proptech companies that cater to real estate investors is emerging. Some platforms highlight the market's most lucrative assets and forecast their development and return on investment (ROI), which are essential insights for investors. Even managing their assets, such as stocks, is made easier for investors by some instruments. They can use those apps to monitor the condition and worth of their real estate portfolio and receive alerts when it's time to close deals or enter new ones.

Virtual reality

Virtual reality (VR), which became a useful tool during the pandemic, is still a major topic in the real estate industry and is expected to gain more popularity in the future years. The global VR industry was worth $27.96 billion in 2021 and is estimated that it will be worth $252.16 billion by 2028. Already, technology has streamlined the buying and selling process. Customers can now take virtual house tours of prospective homes due to VR-based services, and they can communicate with real estate agents or developers' representatives as if they were all present in the same room. It is important for buyers who want to buy a house for themselves but do not want to spend days and thousands of dollars traveling the world in search of the ideal residence. Real estate investors who intend to rent their homes, however, can also profit.

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