Traditional Real Estate Companies Need to Engage with Fintechs

The real estate industry needs to shift focus from defense to engagement and examine its business strategy of working with fintechs. Today fintechs have penetrated the real estate industry in a big way and that makes it necessary for the industry to start taking steps to engage more meaningfully with the fintechs.

In 2017, the number of RE fintechs across the world was around 1,318, which is about 8 times more than their number in 2008, when it was around 176. The number of fintechs that are in the business of target financing and investing or leasing and purchase-sale transactions are much less than startups that are focused on property development and management. The U.S has the largest number of fintechs with the maximum volume of business being generated. Elsewhere, India and Germany are the other markets where fintechs are coming up strongly.

Globally, investments in RE fintechs have grown strongly over a 10-year period from $2.4 billion in 2008 to $33.7 billion in 2017. The dominant source of funding remains venture capital (VC) but there has been a substantial flow of capital from other sources as well. These include RE services companies and investors, private equity firms, high net worth individuals and REITs. Investments are the highest in the US and India while China moving in aggressively to push Germany to the fourth spot.

Dealing with fintechs is a challenge

There is some anxiety among traditional RE companies about dealing with startups, which they consider a threat. The ability of startups to package their offering in innovative ways that create much better customer experiences in quick time and at much lower cost is uppermost in the minds of incumbent real estate companies. However, staying away from these fintechs is not an option anymore for the traditional RE companies. They must find ways to leverage these aggressive startups to leverage operational efficiency. It will help them drive better customer experiences as well as add more features in their offerings to generate new revenue models. Most importantly these legacy RE companies can leverage technology adoptions by dealing closely with the fintechs, and create a more level playing field for the future.

Park West Capital offers construction finance to players in the building, construction and commercial real estate sectors at competitive terms.

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