Real Estate in Emerging Economies – Lack of Data

When researching or analyzing real estate in developed parts of the world and comparing the same to emerging economies – It is easy to notice a big difference in access to high quality, reliable data (or the lack of it) in many countries. It is impossible to answer even seemingly simple questions like –

  1. How many home were bought/sold in this city in September 2020?
  2. What is the average property price in a given location?
  3. What is the expected rental price for a unit in this city?
  4. Do most buyers take a loan to buy property, or finance it themselves?

In many of these markets.

In an age where companies like Facebook probably know what you had for breakfast this morning, information about real estate transactions is very hard to access.

While data about real estate data even in developed countries has many missing elements, the infancy of the data capture eco-system in countries like India or Indonesia might astound many.

 

Why is this is a big problem

Society pays a big prices for this lack of quality data. A few reasons why it is a problem include –

  1. No transparency in the real estate sector. This makes movement of institutional capital very difficult, and drives up the prices of properties as projects need to be financed at a higher interest rate
  2. Brokers with limited training have a big say in the real estate market as they have access to hyperlocal information, which is not available to others
  3. Transactions take longer to conclude for everyone. Makes the industry slow to move, and makes things expensive for end consumer
  4. Industry remains relationship driven and not data driven, which is bad for retail consumers as they don’t have access to data to make informed decisions

For the real estate economy to boom, and become available to all members of society in an equitable manner, it is important that the data is openly accessible to all. Else, it will continue being perceived as a ‘blackbox’ industry.

Some potential solutions –

  1. Government records – Most Govts keep a record of sale transactions in real estate as there is a revenue stream for them via stamp duties/income tax. Unfortunately, most of this data lies offline in paper form, or in a local server at the registration office. It would be of immense value if this data is digitized, but anonymously shared with the world
  2. Property portals and aggregators – Most countries have property listing platforms that help connect buyers and sellers. The challenge with them is simply that they only have access to ‘list prices’ which is the initial ask of the sellers, but don’t have the ‘close price’ which is the final selling rate after negotiations. It would be great to build real estate valuation models which takes into account both ‘list price’ on these portals but refine them by doing on-ground research of ‘close price’ to arrive at correct value of assets
  3. Brokerages – Real estate brokers have access to the exact terms of transactions, but this information lies siloed within their organizations and they have little incentive to share it with any one else. A good way to unlock new data streams would be to work with brokers to digitize their data by giving them incentives to share the same
  4. Property management softwares – Apartment/HOA management softwares have great distribution within societies and have access to rich information about sale/rental properties through their management system. It would be useful to build on top of this data to build real estate valuation models

Reliable data is imperative for any industry to function, and real estate is no different. While gathering and constantly updating real estate data will be a challenge, the rewards will be well worth it. Many companies are working towards finding optimal solutions for this problem, and I really hope to see some impact in this direction over the next 5-10 years.

If you are a company working towards bridging the information asymmetry in the real estate industry, I would love to hear from you! Drop a comment below, or find me on LinkedIn – I would love to talk and help in any way I can.

This blog was originally posted by our co-founder Ajay Kumar on his personal blog here.

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