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PropTech in Russian Real Estate and Construction. Results of 2020


On April 26, the AEB Real Estate Committee held a webinar dedicated to PropTech in Russia, with an overview of current trends in innovations in construction and real estate and their expert analysis. 

In her introductory speech, Tatyana Kovalenko, Chair of the Committee and moderator of the meeting, set the direction of the discussion by inviting the participants to evaluate both the degree of influence of high technologies on business development and the motivation of Russian developers to implement them.

The concept of PropTech combines innovations applied in different segments of construction and real estate market, at all stages of projects: from design and engineering to maintenance and disposal. Ivan Nokhrin, co-founder of PropTech Russia, highlighted four directions for the development of advanced technologies: smart city planning (design of cities and individual buildings, logistics at the construction site, safety and quality control, etc.); "flexible" spaces (planning, navigation, etc.); digital maintenance of facilities (possibility to change the room service parameters, to supervise resource consumption, etc.); finances and transactions (integration, automation, conversion into electronic format of evaluation, forecasting, and transactional processes). All this combined, according to the speaker, ensures quality improvement and risk reduction, and therefore makes a business model more sustainable and ultimately leads to increased profitability. The expert noted that application of such innovations has become a noticeable trend in recent years: specialized venture funds operate in the market, acceleration programs are implemented within companies, "sandboxes" are organized to test certain products and check project parameters. Investments in "smart" technologies in construction and real estate have increased by 100 times over the past 10 years (up to $24 billion last year). Meanwhile, due to the overlapping scales of the two markets that form PropTech (the IT market is global and the real estate market is locally oriented), each country has its own unique features in the adoption of innovations.

Vladimir Bibanov (KPMG Russia) presented the results of a survey on the implementation of innovative technologies in construction and real estate management, conducted jointly by KPMG and PropTech Russia, which, in particular, examined the current level of digitalization of the industry in Russia, demand for innovation and its development potential (what business effects can be brought by their implementation, which solutions are worthwhile and to what extent), the restraining factors in PropTech development, and so on. In the speaker's opinion, the conservatism that is inherent for the construction industry is reflected in lower innovations perception rates than in other industries. At the same time, one should distinguish between the level of digitalization and the level of general IT maturity. To assess them, one can analyze the current queries of market participants, the degree of solutions integrity, patterns of investors’ behavior, etc. According to the expert, at present in Russia the practice of integrating individual technologies with basic operations is quite rare, and the implementation of end-to-end business processes is almost missing. The current trend to cut costs also contributes to this, when the customer prefers to redesign existing products to fit the new needs. Factors, affecting the implementation pace of advanced technologies in the industry, also include the complexity of measuring the effectiveness of solutions as well as of forecasting the results.  Nevertheless, a strategic approach to build an innovation-based organization is becoming more and more common, especially among market leaders.

Denis Kondrakhin from Samolet Group, with examples drawn from his company's activities, shared their insight into how cutting edge technologies allow to "digitalize" construction (from design to control), fully automate a number of process blocks (such as sales and purchase, home management or customer relations), improve the client experience and increase the lifetime value (through offering products and services along the entire client journey as well as their technical integration). When looking for high-tech startups, the company acts as both a strategic and a financial investor, thus forming a group of innovative projects that are incorporated into the company and a separate venture capital portfolio. 

Following the question from the discussion moderator: how do changes in the customer image affect the updating of internal processes and the final product, the meeting participants pointed out that acting faster than the customer image is changing is a skill that a PropTech company has to master.