How Artificial Intelligence (AI) can Reshape the Future of Property Valuation


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Introduction

Pakistan’s real estate market can be a challenging place to navigate due to a lack of regulation and adoption of best practices. Those looking to buy or sell real property in Pakistan must rely on valuations given by real estate agents or brokers, with no way of verifying how that rate was derived. A property’s value can depend on many factors ranging from location, property condition, local infrastructure, environment, supply, and demand (PR, 2021). Besides these factors, many other things come into consideration that make a property valuable.

Pakistan lacks a proper system of property valuation which gives rise to speculation and fraud in real estate. Therefore, a system that is reliable and accurate is required to mitigate market risks for buyers, sellers, and investors. This will not only protect people from losing money in bad investments, but it will also regularise the market to protect it from real estate bubbles, a term used to define the artificial inflation of prices. Continue reading to understand how Pakistan can implement a property valuation model.

 

Research Questions

  1. Why is there a need for a property valuation model in Pakistan?
  2. What systems can be used to accurately estimate a property’s value?
  3. Can Pakistan implement such systems in the real estate sector? 

Need for Property Valuation Model in Pakistan

Property valuation is a key element of buying, selling, and investing in real estate. An accurate and transparent property valuation can have multiple benefits such as allowing for greater market acceptance among investors, demand and supply regulation, protection from speculation, and significant savings in costs. The traditional model for the evaluation of real estate prices does not stand efficient anymore. Relying on a real estate agent for property valuation requires a tremendous level of trust and confidence. As real estate markets are also not very well regulated, the chance for misusing this trust and confidence grows significantly.

Moreover, property valuations are not only beneficial to potential buyers and investors, but a seller can also use the proper estimation to plan a profitable investment portfolio while reducing the risks involved in real estate markets. Investors can add power to their property price negotiations, real estate firms can monitor and research market trends, agents can stay ahead of the competition, and financial institutions can process loan applications and collateral assessments more efficiently (Appraisal, 2021). Therefore, the need for accurate and transparent property valuation is the need of the real estate sector of Pakistan.

How can Artificial Intelligence (AI) be Used for Property Valuation?

Artificial Intelligence is the system of using large amounts of data, that is organised, cleaned, and analysed, to gain valuable insights and predict future outcomes. Once data has been collected regarding multiple factors associated with a product or service, machine learning algorithms are used to find connections between the different aspects of that data. Considering traditional property valuation models such as the sales comparison method, rental method, building method, and profit method, artificial intelligence can play a key role in determining the current and future market prices of real estate (Julio Gallego, 2004).

Human beings are limited in their ability when it comes to handling large sums of data. But computers can easily process an entire city’s worth of land records, titles, geographic indicators, development indicators, supply and demand indicators, and much more in just a few minutes. That allows for a speedy property valuation model that can factor in all the aspects of the traditional model and more. Not only can AI and machine learning be used to estimate current property values, but they are also highly beneficial in terms of future predictions for investors, developers, urban planners, and the government (Dr. N. B. Chaphalkar, 2013).

Digital mapping of land using Geographic Information Systems (GIS) is a complex system of technologies whereby multiple layers of data are added to a computerised image of a map. These virtual images of a map can be viewed on multiple internet capable devices. GIS systems have a wide variety of applications that make them eligible for being used in property valuation models. Combining the technology with artificial intelligence can create a powerful database of real estate that is also marked by unique identifiers. The AI model can amalgamate public records, transportation options, crime rate statistics, school ratings, and much more to generate an analysis of a particular property’s value (Esri, 2021).

Can Pakistan Implement AI Systems in the Real Estate Sector for Property Valuation?

Pakistan lacks behind in the adoption of real estate technologies at the moment, but companies like Graana.com are changing the real estate dynamics of the country. Being Pakistan’s first online real estate marketplace, the company has introduced a wide range of PropTech solutions in the real estate sector. Pakistan’s major cities and planned areas have not yet been digitally mapped. However, the company has successfully conducted a land infrastructure and digital mapping of all major cities of Pakistan. The technology and innovation wing of the company, PropSure Digital Solutions, is also using artificial intelligence for a wide variety of products such as interactive help desks, customer experience solutions, listing optimisations, and property valuation models. As an industry leader in PropTech solutions, Graana.com has the potential to bring the much-needed property valuation model to Pakistan’s real estate sector.

Conclusion

The potential for Pakistan’s real estate market is vast. As the country shows signs of growth even after surviving three waves of the deadly covid pandemic, the construction and real estate sector are showing heightened activity and investor confidence. A sharp rise in real estate prices is a testament to the practice of speculation in the real estate markets of Pakistan. The introduction of a property valuation system using artificial intelligence can greatly improve the reliability of conducting business in Pakistan’s real estate market. Companies like Graana.com are taking the initiative by investing in Pakistan’s real estate sector through the introduction of different PropTech technologies. Therefore, accurate and transparent property valuations can be used to uncover the potential of real estate in Pakistan.

 

Key Takeaways

A property’s value can depend on many factors ranging from location, property condition, local infrastructure, environment, supply, and demand.

Pakistan lacks a proper system of property valuation which gives rise to speculation and fraud in real estate.

An accurate and transparent property valuation can have multiple benefits such as allowing for greater market acceptance among investors, demand and supply regulation, protection from speculation, and significant savings in costs.

Artificial Intelligence is the system of using large amounts of data, that is organised, cleaned, and analysed, to gain valuable insights and predict future outcomes.

Digital mapping of land using Geographic Information Systems (GIS) is a complex system of technologies whereby multiple layers of data are added to a computerised image of a map.

The AI model can amalgamate public records, transportation options, crime rate statistics, school ratings, and much more to generate an analysis of a particular property’s value.

Pakistan lacks behind in the adoption of real estate technologies at the moment, but companies like Graana.com are changing the real estate dynamics of the country.

 




How Artificial Intelligence (AI) can Revolutionise Real Estate


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Introduction

As the world moves into an age of information, those who can quantify and analyse large sets of data will always have the market edge over their competitors. Developments in technology are changing business models across major industries, and the transformative effect of technologies like artificial intelligence is driving change towards a more immersive and data-driven approach in various aspects of a business. Machine Learning (ML) and Artificial Intelligence (AI) have the power to revolutionise the real estate sector by making it more innovative and accessible to the larger public. As more and more processes become automated such as in-person appraisals, fillings, and closings, customers are seeking out more virtual options and digital solutions as they are hassle-free, provide transparency, and proper record management. Using AI, the real estate industry can acquire large amounts of data, predict market trends, improve home search experience, intensify lead generation, make efficient mortgage lending, and make real-time population analysis and predictions. Pakistan has also taken steps to regularise the technology and formed institutes for training future tech leaders. Therefore, Artificial Intelligence can revolutionise the real estate industry through its diverse field of application, which the Iqbal Institte 

 

Research Questions

  1. What is artificial intelligence?
  2. What are the applications of artificial intelligence in real estate development?
  3. How can artificial intelligence revolutionise real estate?
  4. What steps is Pakistan taking to incorporate artificial intelligence in its real estate industry?

 

Artificial Intelligence

Artificial Intelligence (AI) sounds like a complex term, but it is a remarkably simple process to understand. A digital computer can perform tasks commonly associated with intelligent beings. Computers can be programmed to carry out overly complex tasks such as finding proofs for mathematical theorems and playing chess. Using large sets of data and algorithms, the computer can train itself on certain parameters. Using these parameters to make judgements and predictions in similar cases, the computer can learn from new data sets without human intervention.

By recognising relationships and patterns in large data sets, the effects of possible future scenarios can be examined more closely. Subjective assessments are replaced by actual data and insights, resulting in sound and specific decisions. Modern AI techniques can only be used to automate a single task and are not able to attain a more general intelligence role, such as a human brain. As technology advances, previous benchmarks become outdated, such as recognising text from pictures, which is now considered a normal computer task. The applications for AI are endless and can be applied to a variety of industries and sectors. AI is currently being used in the healthcare industry, self-driving cars, financial fraud detection, and streamline trade and supply chain management. (Investopedia, 2021)

 

How can Artificial Intelligence Revolutionise Real Estate?

The real estate sector has always been slow in adopting innovations. However, many key players are now starting to realise the importance and potential of artificial intelligence is revolutionising the real estate industry. With the digitisation of services on a massive level, the number of data sources has now exponentially grown. Data on individual profiles and financial rankings are easily available for commercial use. Artificial intelligence (AI) can be trained to gather specific data related to real estate from diverse sources. These large sets of data can later be used to provide prescriptive and predictive analyses of the market which will exponentially increase the decision-making capacity of investors and finance companies associated with real estate.

By integrating the market, every piece of information extracted from any user-generated activity can be tracked and analysed to gain valuable insights. Artificial Intelligence can also be used for smarter real estate management. When it comes to large properties like offices and corporate buildings, underutilisation can take up a sufficient part of the budget. Poorly managed commercial space often leads to employee dissatisfaction. Using sensors and the Internet of Things (IoT) devices, AI can help real estate management professionals in the effective utilisation of office space. Using Wifi and Internet of Things (IoT) devices, data can be analysed and turned into valuable insights. These insights can help managers make better decisions about office spaces. People can ‘talk’ to spaces using natural language recognition tools, and AI can ultimately better understand the user’s needs.

Searching for a new home is also a difficult task as a lot of different factors have to be taken into consideration before buying a new property. Traditional search engines have very few filters and often leave the buyer with many options to search from. This is where AI-based algorithms come into play. With AI-powered personalisation tools, the user’s preferences can be identified, and suggestions made accordingly. Some apps can scan user photos to extract relevant information such as preferred type of floors, colour palettes, and construction materials. The system can also match the preferences with other similar people and create a unique portfolio for the buyer. ‘Predicting the future is perhaps the most prominent feature of Artificial Intelligence. The real estate industry is an industry of high stakes and high rewards, and the ability to predict outcomes is extremely useful. AI systems can investigate past data and trends in the market to provide an accurate prediction of the future market trend.

One of the most successful applications of AI has been in property investment. Traditional agents are accustomed to the standard model of evaluating property using covered area size, renovation quality, and other common features. But when it comes to the high-end real estate market, setting the right price often guarantees the success of a transaction. One problem which usually arises in the real estate market is that of lead generation. AI can be used to differentiate between customers with real intentions to buy a property and those who are browsing out of curiosity. Lastly, a big part of the real estate industry is mortgage lending, which is data-driven by definition. Bank statements, credit histories, proof of income, and many other papers are required for getting a shot at lending. Banks use OCR systems to read documents, but the drawback of such systems is that they cannot recognise unstructured documents. This is where AI can come into play and transform the amount of information that can be analysed before making a lending decision.

 

Conclusion

The real estate sector is complex. The data circulating within the sector is more so. However, this does not mean that the data is not useful or cannot be used effectively to make the sector more sustainable and user-friendly. Data often carries missed opportunities when not interpreted fully or accurately. Business intelligence is, therefore, a vital process that can provide useful insights into future market trends. It also makes the sale and purchase of property easier and provides for a better consumer experience in the mobile app world. Therefore, business intelligence can be used to revolutionise the real estate sector of Pakistan.