Proptech: Reshaping MEA's Property Landscape

The property industry is unique in many respects. When compared to other sectors, its social and economic significance stands out as virtually unmatched. At its core, it addresses the elemental need for shelter and provides access to essential utilities such as water and electricity. Beyond its utilitarian role, the property sector is an incontestable economic force, both in terms of employment generation and as a linchpin for economic stability. One only has to recall the Great Recession of 2008 to understand the role of the housing market and its regulation, on the equilibrium of the global economy.

Real estate is also the largest asset class in the world with a global market size estimated at over $338 trillion in 2022, exceeding the combined value of all stocks and bonds and representing the largest store of wealth globally. The built environment is also the foundation of most other industries, from financial services to transportation. It is a sector that simultaneously carries societal necessity, economic influence and infrastructural indispensability.

In the Middle East and Africa (MEA), property is a tale of both deep challenges and significant opportunity. In markets across the Gulf, the sector represents over 10% of national GDP, yet remains highly inefficient due to the complexity of its value and supply chains. In Sub-Saharan Africa, a rapidly urbanizing population combined with a lack of urban planning is creating a housing deficit estimated at roughly 51 million units. Eliminating it, however, is an opportunity that could generate over $5 trillion in economic output and create an average of 26 million jobs per year.

As a whole, the sector is expected to shift considerably in the next decade, due to a combination of factors from the environmental impact of the built environment, affordability concerns and fundamental shifts in the ways we live, work and build communities. The silver lining is that developments in property technology will play a key role in facilitating this transition in an industry that has historically been the slowest to digitize.

Proptechs are tackling the sector’s challenges at every point of the property value chain. Artificial intelligence (AI) is not only reducing the time it takes to render designs from hours to minutes, but it is also optimizing architectural plans to precise outcomes and key design features, such as energy efficiency and structural integrity. Applications of generative AI in design extend the limits of what was once possible, creating opportunities to build sustainably, efficiently and more affordably from the onset.

Advances in material sciences and additive manufacturing (AM) are expanding the possibilities of how we build, while also localizing supply chains. Alongside AI, these technological developments are allowing architects and engineers to explore alternative and more sustainable building materials, while assessing their feasibility when accounting for the project’s budget constraints and client’s requirements. Reducing energy consumption by 20% and water usage by 40%, green properties are proven to be more economically viable over their lifecycle, driving down the total cost of ownership. From AI to AM, proptech in this space is radically shifting the ways we source materials and construct buildings, enabling a return to modular prefab homes that are inherently more environmentally friendly, affordable and time efficient.

In the realm of property commercialization, the digitization of assets is redefining the concept of ownership. Tokenization enables fractional ownership of real estate through digital tokens representing ownership stakes. This democratizes access to property investment, breaking down traditional barriers and allowing a more diverse range of investors to participate in real estate markets. By fractionalizing properties into digital assets, tokenization improves liquidity in the real estate market.

Home affordability challenges – especially in markets across Sub-Saharan Africa - are driving entrepreneurs at the intersection of proptech and fintech to build solutions that make homeownership accessible to all, from rent-now-pay-later models to monthly rental agreements and co-sharing solutions.

MEA is home to some of the most dynamic and resilient property markets globally. In the Gulf, it has consistently grown over the last decade, with the total value of planned or underway real estate projects standing at $1.7 trillion as of 2024. From 2022 to 2050, half of the global population growth will occur in Sub-Saharan Africa, with the region’s population currently growing 3 times faster than the rest of the world, which will exert pressure on property demand, from residential to office space. In older property markets across the region, such as Cairo, demographic growth and suburbanization are decentralizing traditional urban centers in favor of suburban, mixed-use, residential and commercial spaces. In a nation where 96% of the population lives on 6% of its land, proptech is a whitespace of opportunity to reimagine the future of spaces.

Venture capital (VC) is increasingly recognizing the significance of proptech innovations. While the current market is undoubtedly different, VC invested over $11 billion into proptech startups in 2023.  Today’s macro-economic environment does not negate the industry’s inherent and historically proven characteristics: real estate is recession proof; it is the largest store of consumers’ wealth and how individuals create and pass along generational wealth. What is changing, however, is how investors are now thinking about proptech. The opportunity cost of investing millions of dollars into a long-term, slowly depreciating, tangible asset (as VCs have traditionally done) does not classically align with a fund’s lifecycle. Success in proptech will be found in the opportunities that center on the ‘tech’: the businesses focusing on displacing legacy solutions or manual workflows, as well as property-focused financial products.

Within the MEA region, VC invested a total of $778 million in the proptech space since 20197. We believe the region has a unique advantage in developing, testing and deploying property technologies largely driven by the size of the market, the depth of the opportunities and the chance to leapfrog legacy infrastructure. Today, pockets of property innovation are emerging across MEA, from the United Arab Emirates’ (UAE) Huspy digitizing home financing to Nigeria’s Spleet redefining the landlord-tenant dynamic across Africa. This is only the beginning of what will be a technological revolution in how we conceptualize, build and manage property.