Dubai-based proptech startup Realiste develops an AI-powered platform for real estate investing. It operates in 20 cities worldwide, including Dubai, Abu Dhabi, and Istanbul. This year, the team plans to launch its innovative system globally in more than 30 cities, focusing on the MENA. In this paper, the company explains why MENA is now one the most promising regions for proptech in the world and what technologies will accelerate its Real Estate market growth.
Why Realiste believes in the MENA
Low level of digitalization. Real estate markets in countries of the Middle East and North Africa, the UAE and Saudi Arabia in particular, are at the low stage of digitalization. That is why completing a real estate deal there takes lots of time and effort. Platforms like Realiste can significantly simplify this process by gathering and analyzing enormous amounts of market data and building forecasts for future growth and potential ROI within seconds instead of weeks.
Low level of transparency. MENA's real estate markets need to raise transparency levels to attract more investors to the market. Some cities have already significantly improved in this field in recent years. For instance, in 2022, Dubai's real estate market entered the 'transparent' tier in the Global Real Estate Transparency Index (GRETI) for the first time. The Emirate gained three ranks in the index to 31st position globally and is the only property market in MENA to feature in the 'transparent' tier.
However, other countries are still behind. For instance, Saudi Arabia and Egypt got into a semi-transparent group and a low-transparent market category, respectively. To improve, they need technologies capable of collecting and analyzing enormous amounts of data and displaying it to the market players.
Support of digitalization from government officials. At the same time, governments in the MENA are eager to raise digitalization. Saudi Arabia, the largest economy in the Arab world (nearly twice the size of that of the United Arab Emirates), aims to lead this transition. Last year Saudi Arabia announced more than $6.4 billion in investments in future technologies and entrepreneurship. That can secure its desired position as the MENA region's leader in digital transformation.
Construction boom. Real estate market in Saudi experiences some of the largest scales of construction in the region. For instance, by 2030, Kingdom is planning to build eight new megapolises, including Neom, Qiddiya, Red Sea Project, Amaala, Al-Ula, Diriyah Gate, and others. Investment in these projects accounted for almost $575 billion. This funding will allow the development of 1,3 million housing units.
As for the existing cities, they will go through some crucial changes too. To illustrate, Riyadh, the capital of the Kingdom, will see the addition of 100 000 new homes by the end of 2023. Real estate has become one of the main objectives of the local government due to rapidly shifting demographics. Saudi Arabia's population has increased by over 20 percent between 1970 and 2020. In addition, more than half of the Kingdom's citizens are younger than 30. And most of them migrate from rural areas to cities for work purposes.
Interest in foreign capital. Due to ambitious and money-consuming plans, foreign investments are highly welcomed in the region. For instance, Saudia Arabia aims to double the inflow of foreign direct investment more than 18 times during the upcoming decade and gain SR388 billion (virtually $90 million) annually. It also eases its regulations towards expats, including visa rules.
Venture and investment markets boom.
In the MENA, numerous private and governmental funds, family offices, and angel investors are now ready to invest in innovative ideas. This trend contrasts the USA, Europe, and China, where financing and deals decreased due to higher interest rates and recession fears.
To illustrate, Saudi Arabian startups secured a total of US$987 million across 144 deals, representing a 72% increase in funding volume compared with 2021. A record-high 104 investors participated in deals closed by Saudi startups in 2022, up 30% versus 2021. Saudi Arabia also recorded double the number of exits in 2022 compared to 2021, with 10 exits.
There is a growing interest in proptech as well. Some funds focus solely on startups developing state-of-the-art technologies based on AI, 3D, etc. For instance, last year, Saudi-based financial firm Watheeq Financial launched a $26.7 million (SAR 100 million) Venture Capital Fund to invest in global, scalable startups leveraging technology in the real estate sector as real estate became a flourishing sector.
Property tech in MENA: why AI is the king
It is expected that the Middle East real estate market will expand by up to 111% during the following five years, according to a Deloitte report. Technologies will become the most significant driver behind the growth as they elevate the most critical issues of local markets Numerous property technologies will shape the real estate market in the Middle Estate and North Africa, including virtual reality and metaverse. But the most crucial contribution to the region’s economy will be secured by artificial intelligence (AI), a technology that is currently gaining momentum. Annual growth in the economic contribution of AI is expected to reach 20-34% per year across the MENA region by 2030, with the highest rates expected in the UAE and Saudi Arabia. These two countries alone will be accruing more than US$320bn combined. This possibility derives mainly from costs saved through automating processes and improving products and services across the region’s industries.
Modern consumers are demanding. Due to massive technological progress across numerous industries, they are used to the services they get in one click. It is simple to order food and a taxi, buy a ticket for a flight, or transfer money to one another. However, when it comes to property, it is still a challenge.
That is why there is enormous potential in self-service solutions like Airbnb. Instead of dealing with a realtor, customers can choose and book property directly from a developer using a website or an app as if they booked an apartment via Airbnb. Furthermore, customers can now buy property online without the need to visit a particular apartment.
Among the growing number of self-service solutions, there is an emerging category of proptech startups that target real estate investors. Some platforms highlight the most profitable market assets and calculate their future growth and ROI, which is essential information for investors. Some tools even help investors to manage their properties, like stocks. Using those apps, they can observe their real estate portfolio's current state and value and get signals to exit deals or jump in new ones.
Some platforms also help people invest in real estate collectively with strangers. As they allow investors to split costs with each other, they make it possible to operate with smaller checks. Hence, these services further eliminate financial barriers associated with real estate markets and raise capital inflow in the industry.
Becoming a valuable tool during a pandemic, virtual reality (VR) is still a buzzword for the real estate market, and it will attract even more attention in the upcoming years. According to The Insight Partners’ research, the value of the global VR market was $27.96 billion in 2021 and is expected to reach $252.16 billion by 2028.
Technology has already made sales and purchase procedures smoother. VR-driven services now offer customers virtual house tours around their potential homes and make it possible to talk with a realtor or developers’ representatives as if they all were in the same room. It is essential for buyers who wish to purchase a property for themselves but do not want to spend days and thousands of dollars traveling around the globe to find the perfect home. However, real estate investors planning to rent their properties can benefit too.
There is another way for the industry to gain from VR. Technology can help estate players improve their sales and management skills by simulating real-life situations they usually face dealing with potential customers.
AI has the potential to accelerate the growth of the real estate market, among others. Unlike humans, technology can collect and analyze gigantic amounts of data about the property.
There are already technologies that can highlight the most overpriced and underestimated areas in different cities across the Middle East and calculate future price growth based on collected data.
AI-powered tools significantly raise the transparency of housing markets and enable buyers to choose options in cities they have never even visited before and know nothing of. That is especially valuable for real estate investors seeking the most profitable deals globally, including the emerging MENA regions, and spending months on research. Thanks to AI, they can now choose properties within seconds without the need to visit a particular city and calculate ROI and other vital metrics by themselves.
What Realiste’s AI does, for instance, for a real estate market: it reveals the most overpriced areas of a particular city and the most underestimated ones, highlighting the average price of an apartment in each district up to date and showing the price history of properties there. In addition, it builds a forecast on how prices in these areas will change in the next 1/2/3 years. And all of this data accumulates within seconds. Hence, this product has the potential to make the real estate market in a particular city highly transparent and attract more property investors to the region as they can make informed decisions concerning a specific property: using our tool, an investor can see what prices were in a particular area before, what and how will affect them in the following years, and understand what ROI he may expect.