Thursday May 23rd, 2024
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The Rise of the Middle East’s Proptech Sector

Despite being one of the sectors most impacted by the funding crunch, proptech in the MENA region has found room for growth.

Startup Scene

Property technology, or proptech, is often an overlooked sector in the MENA region’s startup ecosystem. With most investors focusing on fintech, ecommerce and logistic startups, proptech often takes a back seat when it comes to funding.

In 2023, investments in MENA’s proptech sector reached an estimated $70 million, compared to $101 million the previous year, according to Wamda Research Lab. Total funding in the region was on the decline last year, decreasing by 23% compared to 2022 according to Magnitt; proptech was among the sectors that were most impacted by the funding crunch.

Despite this, the sector appears to be on the cusp of growth. A number of startups are entering this space in hopes of changing the way people buy, rent and own properties in the region, especially in countries where real estate is booming, like in the UAE, Saudi Arabia and Egypt.

“Real estate is a heavy asset class,” Rami Tabbara, Co-Founder of Stake, a digital real estate investment platform based in the UAE, tells StartupScene. “The people that control real estate, and the way they work is usually old and outdated, but technology now is starting to be introduced to this sector, making it more digital and transparent. Today, you can order food, and buy stocks in a few minutes, so why can’t you buy or invest in real estate in a similar fashion?”

DISRUPTIONS BEYOND PROPERTY LISTINGS

While property listings usually make up the bulk of proptech startups, other business ventures are also emerging and gaining momentum in the region.

Stake is making it easy and accessible to invest in properties in Dubai. Instead of a property having only one or two owners, the startup allows for multiple people to co-invest in a single unit. “We allow anyone from anywhere in the world to invest in real estate in Dubai, starting from Dhs500,” Tabbara says.

Through the platform, investors get a share of the property, making returns on rent or sale. Tabbara states that so far, this model has proven to be successful since there is a lot of interest from people across the globe to invest in Dubai. “As a business right now in the UAE, specifically in Dubai, it provides one of the highest rental returns, highest yields in the world,” he adds. “And people from all over the world want a piece of Dubai.”

The startup aims to bring the same concept of co-investing to Saudi Arabia. With the Kingdom’s Vision 2030 encouraging diversification of its economy away from oil, the market is ripe for growth. “We believe what’s happening in Saudi Arabia is a once in a lifetime opportunity, especially with Vision 2030,” says Tabbara. “There is so much opportunity to really participate in the growth of the real estate market, and we want to be one of the first ones.”

Yazeed Al Shamsi, Co-Founder and CEO of Ejari, a rent now, pay later proptech startup in Saudi Arabia, is also seeing a shift away from property listings. While he states there are quite a few property listings startups in Saudi Arabia, there are also opportunities for other niches, especially since the sector is still considered nascent.

Ejari, for example, provides flexible payment options for people renting a home in the Kingdom. Instead of having to pay rent up front annually, the startup rents the unit on a customer’s behalf and re-rents it to them with a monthly payment plan.

“I think we've barely scratched the surface, not just for us, but also for the market in general,” says Al Shamsi. “Last year in Saudi Arabia, proptech raised about $40 million, compared to close to $800 million for fintech, so there is still a lot of room for growth and a lot of opportunities for digitisation within the sector.”

WAVES OF INNOVATION

Like any sector, proptech has evolved over the years, from simply bringing properties online to facilitating financing and changing the way real estate is owned.

Partment, an Egyptian proptech startup that allows multiple people to co-own second homes in Egypt and more recently Greece, has seen the market go through several waves of innovation since launching a few years ago. From aggregator platforms to financing facilitators, proptech startups are evolving in the region.

“The first wave was the digital wave, or the wave of bringing everything analogue online, which started with listing platforms,” says Nadim Nagui, Co-Founder of Partment. “Wave two includes the digital platforms that provide different options for users to purchase and finance property, and wave three, which is the wave we’re in right now, is about reimagining the ownership and usage of properties. Today, we’re applying technology to fractionalize the asset, we’re applying technology to govern who goes when, and create this shared economy experience.”

Although co-ownership may be a new concept, Nagui expects it to pick up as it makes real estate more accessible and affordable. “It’s an opportunity that people may not have had without co-ownership,” he says. “I think that’s the future or real estate, changing the way people are going to own property.”

INTEGRATING AI

Innovations in proptech will not only be limited to buying, renting, and owning properties, but will soon include integrating AI into the industry. While AI may be a trending global topic today, it is also technology that is bound to transform the way many businesses operate.

For Nomad Homes, a UAE-based property technology startup, adopting AI will help facilitate the work of its real estate agents. “Where we see AI disrupting the industry is actually the role of what the agent does,” says Helen Chen, Co-Founder and CEO of Nomad Homes. “AI should really be an enabler for agents, making them so good at what they do. AI should be taking the routine and mundane tasks out of the day to day, and allowing agents to do what they do best, which is allowing relationships with people and sharing expertise.”

She states that AI can support agents in crafting emails, reminding them to follow up with prospective buyers, and prompting them to have buyers preapproved for a mortgage if they’re early in their buying journey. “These are the advancements that we are seeing within technology today.”

But for proptech to continue growing in the region, it needs funding. And with the funding winter prolonging, startups will have to rely on growing sustainably and reaching profitability soon, if they wish to leave their mark in this sector. “The VC world is going back to basics, and putting more emphasis on good business fundamentals, and solid foundations,” says Nagui. “Overall, it is a different environment than before, but I think ensuring that you have the right fundamentals in place will unlock the right conversations.”

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