PropTech in Tanzania: A Catalyst to Real Estate Industry - Presentation Highlights

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Exploring the impact of PropTech in Tanzania, this presentation delves into the 4th Industrial Revolution discourse, PropTech investments in Africa, solutions to real estate challenges, and emerging issues. With a focus on the historical account of PropTech's evolution and its implications on urban and rural development, the paper provides insight into the transformative potential of technology in the real estate sector.

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PropTech PropTech Tanzania: A Catalyst to Real Estate Tanzania: A Catalyst to Real Estate industry? industry? Paper prepared for Presentation at the 2nd Annual Conference of the Association of Professional of Tanzania 26th-27th August, Verde Hotel Zanzibar By Felician Komu, PhD email: komu@majengo.co.tz

Presentation Outline Introduction 4th Industrial Revolution Discourse PropTech investments in Africa PropTech Solutions to Real Estate Challenges PropTech Impacts in Real Estate Emerging Issues Conclusions PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 2

Introduction Historical Account of PropTech Advent 1 9 6 9 1 3 5 0 1 7 0 0 9 0 0 Cyber systems Early Industrialization- 3rd Industrialization Focus Capital Markets Digital Industrialization 1st Revolution - Focus: raw materials, Leasing Land Industrialization 2nd Revolution- Mercantile- Focus- Markets Agrarian 4th Revolution ?? Rural- Focus: Other people Focus: other people Urban Renaissance Urban Dispersal Rural Semi-Urban Urbanization Physiological Needs and Functions Social Needs Esteem, Status and Self Actualization PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 3

4th Industrial Revolution Discourse What is 4th Industrial Revolution? Started around 1969 in USA, USSR & Europe introduction of Electronics, IT and Automated Production Developed into an array of cyber systems around the globe Building and extending the impact of digitization in new and unprecedented ways Has disrupted boundaries of knowledge sets across entire economies, bringing together the physical, digital and biological worlds. The Revolution has manifested itself in advances made in: artificial intelligence (AI), the Internet of Things (IoT), Robotics, Generic Engineering, Blockchain PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 4

Source: https://www.proptechforgood.com/post/society50-proptech-sdgs PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 5

Investment in PropTech Platforms Definition of PropTech? is any technology-based innovation or platform that makes planning, managing, developing, buying/selling/renting, and the usage of real estate more efficient, cheaper and easier at any stage of a building s lifecycle (Rusin, 2020) Tech-driven innovation that is related to buildings and the real estate industry at large. This is tech that influences real estate in terms of design, management, transactions, investment or use (URERU & SA Proptech, 2019) combination of recent innovation technologies and solutions that optimise the creation and management of real estate (Unnisu, 2019) PropTech is redefining our practice: How we operate and interact Modifying traditional practices and services through technology advancements Creating sharing economy- Consumers begin their real estate journeys online PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 6

Investment in Investment in PropTech PropTech Global PropTech investment, has increased from $2bn in 2013 to $18bn in 2018 (https://insights.thebaobabnetwork.com/50-proptech-property-technology-africa-market- map/) Investments in software/digital solutions to products and services for the real estate industry: Online search platforms ( e.g companies such as Digital Rental and Instant Property , which have developed online marketplace model that link landlords and tenants. Support the construction industry e.g project management software Start-ups in several countries that seek solutions to financing real estate development PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 7

Investment in Investment in PropTech PropTech Examples of Startups Nigeria s RealVest and South Africa s CrowdProp provide innovative platforms for people to invest into property as an asset class. Ethiopian company ConDigital, offers construction management software tailored to the African market, helping to improve the efficiency and transparency of the construction industry itself. None from Tanzania in real estate BUT (well) Mbadala set up in 2018 as crowdfunding platform linking startups and individual angel investors supporting micro investment TZS 50-500 per transaction WEZESHAsasa (2021) is the first Tanzanian web based crowdfunding platform whose goal is to raise funds responding to social cause and helping young entrepreneurs to raise capital from investors to boost their business PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 8

Investment in PropTech Worldwide Online Platform UNISSU set up in 2019 to facilitate digital transformation of real estate: Hosts PropTech Events( https://events.unissu.com/ ) An increasing number of Venture Capital real estate companies A total of 13 funding rounds totaling $7.59 million USD in 2020 in South Africa alone closed by PropTech Africa s PropTech ecosystem is growing with fund raising reaching an estimated $18M USD in 2019 (UNISSU, 2020) Latest estimates (2020) more than 200 proptech companies in Nigeria, South Africa and Kenya alone. Other countries such as Botswana, Rwanda, Uganda, Tanzania and Ghana are also witnessing significant growth, the overall number of companies within the sector likely to increase substantially in the next two years ( Godoy, 2020) PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 9

PropTech PropTech Growth Prospects in Africa Growth Prospects in Africa Growth in Proptech Associations: Since 2018, rapid growth in the establishment of proptech associations across Africa including; SA Proptech, Proptech Africa, Proptech Uganda, The Nigeria Proptech Association and Proptech Kenya with many more in the process of being formally organized. Set up of Proptech focused Incubators & accelerators: Growing eco-systems platforms for the PropTech in Africa e.g MEST, through its Pan-African tech incubator and hub PropLab.Africa (Nigeria) through its development and investment programme for proptech start-ups. Dedicated Proptech research and university programs: Strathmore Business School (Kenya), through its Centre of Excellence in ICT Innovation Development and tech incubator and the University of Cape Town (UCT) through its collaboration with URERU Increasing Proptech focused events: In 2020, API Events expanded its Proptech series setting up: The East Africa Proptech Forum in Nairobi, The West Africa Proptech Forum in Lagos, in addition to the annual Africa Proptech Forum being held in Johannesburg in late September. Traditional Africa property stakeholders getting involved in Proptech: Examples Nedbank's partnership with API Events for the Africa Proptech Forum; Profica s partnership with Proptech Africa; Broll Property Groups Online platform; The Kenya Green Building Society s new measuring tool ARC, Pam Golding s (RSA) acquisition of the online digital estate agency Eazi.com PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 10

PropTech Solutions to Real Estate Challenges Four Key Digital Solutions (1) Digitalization and analytics Data digitalisation platforms to facilitate Availability of information Access and retrieval of data and information for investors and stakeholders Market operations: improve efficiency of transactions Investment in technology that upgrades data handling systems Some progress made in Tanzania and generally around Eastern Africa on: Investment in digital land information and management technology (GIS) Special projects like the Integrated Land Management Information System (ILMIS) National Land Management Information System (NLMIS) - Kenya PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 11

PropTech Solutions to Real Estate Challenges (2) Smart building technology Need for cost savings in asset, property and facilities management Need for adaptable buildings in response to health, safety and security concerns Smart sensors such as: occupancy detection systems to determine which space (s) in a building is over-populated Cleaning activators ( auto-flush systems) Green building technologies Design and specification for efficient use of energy, water and other resources Use of renewable energy ( e.g solar ) Pollution and waste reduction measures Good indoor environmental air quality Green building certification programmes ( Projects in South Africa, Kenya, Ghana, Nigeria) PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 12

PropTech Solutions to Real Estate Challenges (3) ConTech (construction technology) innovation platforms data-driven efficiencies across the construction process: recording and benchmarking productivity and facilitating the exchange of information between main and sub-contractors Data-driven to accelerate the delivery of mass scale affordable housing projects: bringing down overall development costs across the construction sector. Crowdfunding of projects Data-driven to ensure quality environment: minimize construction waste: Efficient ways of handling waste Recycling waste PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 13

PropTech Solutions to Real Estate Challenges (4) Blockchain technologies Blockchain technology is one of the most exciting innovations BT defined as a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system A blockchain a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Tackles THE chronic land registry issues by changing the manner in which ownership of property is recorded and transferred; Being embraced by several countries during the last 5 years 1) Seso Global, a blockchain powered mortgage registry and real estate platform, Piloted in Nigeria but stretched to South Africa collaborated with Centre for Affordable Housing Finance (CAHF) to develop SA s first blockchain-based property register 2) Landlayby, a Kenyan startup, is also developing a blockchain based property registry in Kenya, which will help eliminate cases of multiple ownership claims and fraud. 3) Flyt Tokenization- an initiative to allow investors to redeem and transfer shares in Flyt Hospitality Fund a South African Section 12J fund investing in hospitality property and apart-hotels. 4) Sweden decided move its land registry to blockchain in 2016, once the world s most developed land registry (Biasolo, 2017): facilitating digital signatures, personalized verifications, digital contracts to mitigate risk of incorrect registries and increased trust between actors. Close interaction with public officials controls which information is public and remains private (ibidem). 5) Kenya: National Land Information Management System (NLIMS) aimed at streamlining land transactions in Nairobi. 6) Tanzania: Integrated Land Management Information System (ILMIS) piloted in Dar es Salaam ( two municipalities) Property rights and blockchain have moved from vision to reality in different environments with different focus points PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 14

PropTech and Impacts on Real Estate What PropTech offers: 1. Optimizes the way we develop, manage and use building Providing developers and investors with a more enabling environment 2. Enhances funding and property investment through crowdfunding ( widening the audience e.g Women Fund Raising Groups UPATU Women Fund Tanzania etc) 3. Advancing real estate market resolving : the lack of transparency and accessibility to quality data High cost of development, transaction & construction Enhanced marketing through online estate agencies 4. Streamlining land administration through blockchain technology with its potential application to deeds registries and administration inefficiencies 5. Traceability of past transactions PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 15

PropTech and Impacts on Real Estate PropTech as disruptors of Real Estate ( game changer!) (i) cutting out the middleman by way of peer-to-peer services or products- For Example: a) Airbnb which utilizes a platform to connect landlords and renters in the short-term property rental space, negating the need for rental agents b) crowdfunding where funding is raised on a peer-to-peer basis on an online platform (PropTech and FinTech together!) c) Leases can also take place on blockchain-driven platforms- tenants are envisioned to be connected with homeowners, developers, utility companies (D'Cunha, 2017) to improve fraud prevention, corruption affecting thousands of investors per year and hopes to draw high net worth individuals into the city (Dubai). (ii) driving innovation in property uses by way of cloud working Google Drive, Google Docs, Co-working, Virtual Meeting, Conferencing, On-demand office rentals (? Hourly basis) (iii) driving the efficient use of space by way of the internet of things (IoT), Smart Buildings and Smart Cities providing live measurement of the usage of physical space and utilities in order to reduce wastage, Equipping buildings with smart sensors for measurement and control for health, safety and security (either reactive, or proactive) identifying space that could be temporarily leased on an on demand basis. Applying over whole city ( smart city)- largely monitoring the external environment. PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 16

Significant Impacts of Significant Impacts of PropTech PropTech Key impacts centre around 1) Transaction platforms, 2) Management platforms, 3) Data-driven services and 4) Wide-ranging digital innovation (such as blockchain and virtual reality innovations). Key Beneficiaries discipline wise are 1. Property Management transactions are becoming more efficient and transparent, particularly in the residential sector, through online estate agents and letting services. Through innovative software solutions, new avenues for investment and financing are available through crowdfunding platforms. 2. Land Administration Digitization drastically improves transparency and efficiency of crucial land databases PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 17

Block Chain in LA- Resolving challenges Identifying limits of data transparency at Operational and Strategic Levels (Eder, 2019) PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 18

Strategies for accelerating adoption of ProTech in Tanzania What are we grappling with ? The 3 Ts TRUTHS Desire for market efficiency Liquidity Easy to Find, Finance, Buy, & Sell Property Facilitates Articulation of Truths into Market Trends TECHNOLOGY TRENDS Shared economy Crowdfunding Online brokering Big Data Virtual Reality PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 19

SUMMARY - FACTORS DISRUPTING THE PROPERTY MARKET Urbanisation Social Middle-Class Demographics Internet of Things Technological Big Data Transit-Oriented Development (TOD) Smart Buildings Environmental Sustainability Construction Digitisation Economic Expanding Middle-Class Informality Grassroots Politics Political Local Government Smart Cities PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 20

Emerging Issues - Tanzania in PropTech Paradigm 1. Digital penetration is considerably high: Internet penetration: ~ over 40% of the population Voice/Mobile penetration ~ over 80% (at least 42m out of Appro. 58m) PropTech Platforms Central Government dominance and influence in IT solutions i. Government e-Payment Gateway (GePG), ii. National Land Information Center (NLIC) iii. Ministry of Land Information Systems (MOLIS), iv. Survey Registration System (SRS), v. Land Rent Management System (LRMS) vi. Nyaruhuma Data System (in-house developed software) vii. Spatial Data Infrastructure (SDI) viii. Integrated Land Management Information System (ILMIS) Limited involvement of Private Sector Emerging Startups in non-real estate business (Nurtured by the Tanzania Startsup Association (TSA) Total absence of Crowdfunding for real estate (Interestingly an increasing real stock especially residential sub-market in form of gated compounds and mixed development) 2. PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 21

How is Tanzania Fairing in PropTech Paradigm 3. Awareness levels Lack of technical workshops and forum within the Real Estate Fraternity in the country Tanzania conspicuously missing in Africa Property Investment Summits and lags its Eastern Africa neighbors 4. Client Service Charters Client Service Charters based on non-block-chained data and therefore hardly met! 1) Land registration process and procedures Which Services and offered by which actor ( Municipality, Regional/Ministry of Lands)? What are service standards? Are the time limits set for processing such services achieved? Are the Clients aware of the Standards, Grievances handling etc? 2) Development control ( planning consents and building permits) 3) Funding property development PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 22

How is Tanzania Fairing in PropTech Paradigm 5. Web-based platforms Low levels of digitization of real estate markets Dominance of non-real estate professionals for online business Low level of adoption of papersmart models for sharing of information and facilitating consultations. BUT 6. Growing prospects for Digital Transformation of the real estate mainly due to: Emerging Startups in Digitization of allied fields e.g FinTech Digitization of government payments system Enhanced awareness levels on the changing business models: Real Estate as a SERVICE as opposed to previously perceived PRODUCT and SPACE Embracing global trends -the G5 as enabler towards SMART WORKING Growing understanding of the changing supply systems in real estate especially rental housing sector Outcomes of the Pandemic Covid-19: need for virtual meeting and work PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 23

Conclusion What are the top disruptors for Real Estate in Tanzania? Digitization of Tax payments Person-to-Government (P2G) Business-to-Government (B2G) payments in Tanzania. High rate of urbanization Overladen land administration (registry) Evolving Mega Estate Projects Changing Project Funding Arrangements Emerging Property and Facilities Management Challenges High cost of living and impacts on housing supply Need for One Step Forward and Two Steps Back approach Doesn t the past have lessons for us regarding Valuation methodology? Design and size of our homes? Location and Data impulses demographics and influence of these on real estate What need we do to catch up with the rest of the World Renew our affiliation memberships with regional and international organizations? Urge our members to enroll with other professional bodies within Eastern Africa and attend webinar events? Tanzania and AREPTA in particular NEED to awake to the realities of a new era- Digitization of Real Estate and embrace SMART BUILT ENVIRONMENT FORUM PLATFORMS PropTech Tanzania_ AREPTA 2nd Conf Zanzibar 24