Why is real estate taking long to adapt to tech?

Live chats on a website connected to email addresses and WhatsApp numbers, an aerial view of the community, the roads, amenities listed, close-up views of the ins and outs of the houses on sale on a Youtube channel with 2,770 subscribers garnered 1,800 views three months ago. For now, that is how Spectrum Real Estate Solutions is enabling property viewings and offers online and its manager, Philip Muhoja, says it is taking on digital technologies seriously.

“We already have virtual reality in mind. By now we would be having an application to our website but we are looking at how people are engaging with us. If they demand for virtual reality, we will do it. For now, we are using our Youtube channel to do viewings to properties,” Muhoja says.

Digital technologies arrived and they transformed the way we operate finance, retail, insurance, telecom, media, healthcare and transport as well. Take for instance transport. Who knew one would ever order a boda-boda by merely tapping their mobile phone? Housing construction and rental activities contributed a combined output of 11 per cent of Uganda’s Gross Domestic Product (GDP) in 2018 at Shs12 trillion ($3,255 million). That is according to a 2020 report by Centre for Affordable Housing Finance in Africa.

While other sectors have progressed, the real estate sector has remained largely dominated by traditional brokers who are normally a call away.

“Disruption is there but it is quite slow compared to what other sectors are facing. A number of platforms have been opened for real estate such as Bulooka where people buy and sell properties but it is not picking up. We have not had a culture shift where someone trusts to rent a property they have seen online without seeing it physically,” Jonathan Gombya says.

Gombya who is a facilities manager at Tsebo Solutions sees the need for digital disruption so that the sector can experience some form of organisation and build trust where traditional brokers have exploited loopholes to rip off both tenants and property owners.

Online turmoil

The Association of Real Estate Agents Uganda (AREA) has lived through the years of fraudulent online accounts set up by brokers and multiple listings of the same property by several brokers. AREA only has its eyes on its 450 members while hundreds of agents work unregulated.

“Every boda boda guy is a broker, a shopkeeper, every idler on the street is. Lawyers, people in government, everyone is a broker at the moment. There is no centre of information on our brokers which is because of lack of regulation,” Shirley Kongai, president of AREA adds, “This fraud can only be reduced if we have all our brokers licenced. By the time they get a license, we have inspected their business. This is so that we get to a point where if a broker is to list online, they have to post their licence number. We would be able to trace the person if anything goes wrong.”

The trend of selling, buying and renting properties online picked momentum when players such as Jumia entered the market in 2012. New challengers OLX followed in 2014. Buying a house or piece of land is a major life decision and in the last decade of property adverts popping up on smartphones, buyers have also been treading carefully.

“There have been questions of credibility. Is what I see in the picture or video online the actual property on ground. With previous platforms, there were lots of disappointments, for example many people were ripped off from OLX and such stories discredit the integrity of online. It is even worse with buying a property because not many are willing to invest Shs300m in a house they see online,” Gombya says.

Beauty and environment platform PropTech Uganda is currently partnering with Makerere University to assess the adaptation of innovations within the real estate sector.

Ronald Kaweesi, the projects lead, says equipping players in the real estate business with data before they reach out to the market has its long list of benefits.

“You know what you are looking for in the market. It is convenient. With a smart phone, a broker has a wider customer mapping and we now see brokers who have captured the whole of Kampala,” he says.

There are firms that have operated online way before these popular players. In 2010, Spectrum Real Estate Solutions began listing properties on Facebook and invested in a website a year later. Listing condominium apartments, houses and land for sale on social media sites and website exposes the company to markets it cannot reach physically.

“If I want to target people working in government, online advertising allows me to specifically target them. It gives me edge over a broker who is waiting for a phone call,” Muhoja says.

The website attracts about 10,000 visitors every month, with many Ugandans in the diaspora from US, United Kingdom, Africa, Europe and Asia inquiring about properties online.

“We have just sold a block of apartments in Najeera, some sales in Pearl Marina-Garuga, those clients came through our online platforms. You get leads online. You get a qualified lead if someone picks interest in a property and comes to see the property. Online is like a funnel. If I get 10 leads in a week, not all are buyers. Three will be qualified leads and out of them, one might buy,” Muhooja says.

The site charges sellers a percentage on each sale. Property sales fluctuate depending on market conditions in the year. The average cost of a house or condominium apartment for the middle class and high-end markets that the firm targets is a minimum of Shs250m and Shs1.8b respectively in areas surrounding Kampala. The firm is able to sell between 10 and 20 properties. But selling online comes with its own costs.

“There is the cost of Internet and other things related to it such as advertising. You need to pay the annual web hosting fee. You spend more compared to a broker waiting for a phone call. People need to know that there are some multiple listing websites that are cheaper. They work for people who do not want to spend lots of money online in advertising. They do the advertising for you while you pay an annual fee for space,” Muhoja says.

Paying the cost

So a broker wants to brand himself, set up a website to show customers how different he is, start to show customers what he can do for them, track the people visiting the site, adjust his marketing strategy to the data collected, respond to customer queries, tell his business’ story via social media sites to enlarge reach, budget to boost and purchase advertising, clearly there is a significant amount of money to invest in the transition to digital technologies. According to Albert Mucunguzi, president at the Information Communication Technology Association of Uganda (ICTAU), the average cost of developing an app in Uganda is $10,000 (Shs37m). The minimum amount anyone can spend on hosting a website is $100 (Shs370,000).

PropTech Uganda has spent its time in the market supporting and developing innovations within aspects of surveying, construction and real estate management. It has also observed a thing or two about the brokers that launched in the online space.

Applications, websites and social media platforms are launched but sometimes disappear within a year of operating. Kaweesi says it is all down to an innovator’s business model and value proposition.

“You find that some innovators cannot define the value they are adding to the market. This goes back to the challenge of the business model. If you know those two, then you can work on product development very well. An innovation should not be stagnant. Hire a product developer if you do not know what to do,” Kaweesi says.

He suggests adopting existing applications if you are a broker who deals in real estate as a side gig. If you have an established name, you should consider having your own platform where you target your niche market.

“Real estate is specialised. You find that uptake of innovations is still low. But also if you look at the approach other innovations are adopting, for example, business to business. Their target is not to move out fast to the market. There is an innovation that looks out for banks doing mortgage valuations. If out of 30 banks, you have 20 adopting it, that is good for you as opposed to business to customer application where you have 20,000 downloads in the whole country. Weigh where you fall and take your approach accordingly,” Kaweesi says.

Lessons from other segments

Technology has a lot of alternatives to offer and people selling and buying real estate have lessons to pick from other segments of the property sector, experts say.

“We see companies for example in valuations and surveying adapting technology as opposed to 2019 where they were saying they are not yet there. Companies are changing their websites into platforms to manage their workflows, reports, clients and employees,” Kaweesi says, “What I anticipate is that we shall have the same applications in the next one or two years. I do not expect any change in the marketing of real estate. I expect changes in other segments such as financing and development of real estate.”

There is a transition towards green and high-tech buildings. The process remains slow in Uganda with a few buildings with management systems that monitor performance of equipment including the air conditioning, transformer, lights and generator. It is efficient because you do not wait for equipment to break down to call a technician but this disruption would result into job losses within the sector.

“You are able to monitor on phone, from the comfort of your home, that the air conditioner is about to go off. This system has been deployed on a few buildings. Those that have dared to use it have their challenges such as getting technical people to do the installations. I say it is coming because the new building plans I have seen have it and it all runs on the internet,” Gombya says.

He says real estate should learn to embrace technology. Covid-19 was the loudest wake-up call and now the sector has a chance to learn from mistakes of other sectors as they move to automate.

“Look at rent collection. You find big agents such as Knight Frank have systems where they use auto-generated invoices for tenants. That is happening in top companies while lower real estate companies are still seated with excel sheets and invoices based on that. We should look at leveraging systems that can encompass everything,” Gombya says.