From land sourcing to valuations, from buying to renting, many segments of the real estate market have been dramatically overhauled by a new wave of tech innovation. But nowhere is this transformation more dramatic and visible than in real estate lending.
Real estate is not known as an industry which really embraces change. The nature of the asset class, which comprises large mixed assets traded in a largely private market, is perhaps a good reason for this. Homes may be too important a part of a private portfolio to take any risks with the process whereby it is traded, held, or valued. It may also be the case that there is an agency problem: the professional advisors that dominate the transaction process clearly have an interest in protecting their income sources, so chartered surveyors, brokers, and lawyers might all be expected to resist tech-driven innovations designed to ‘disrupt’ their work.
Nevertheless, we are witnessing a battle for market share between traditional players and a discernible new explosive wave of technology innovation, investment, and entrepreneurial activity in the real estate sector. Nowhere is this trend more noticeable than in the lending market where a new wave of tech-powered, customer-driven, quality-focused regulated lenders have quickly filled the gap left by traditional lenders in a constantly evolving market.
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With their sleek customer interface, efficient processes, transparent lending terms and competitive pricing, this new generation of lenders are powered by technology bandwidth hitherto unimaginable to serve borrowers practically, and with experienced lending assessment staff being able to thoroughly understand their projects. Having spoken with many property developers, the general feeling is that most developers just want to get on with the job of building houses and don’t want to deal with the finance side of getting all the funding in place.
“We just want to work with a lender who understands the property development process and doesn’t waste time asking the irrelevant questions,” said a developer we recently spoke with. To me, this summed-up the feeling of many developers in the market I regularly speak to and whose deals have been delayed or even frustrated by inefficiencies at non-specialist lenders who could not get their head around the ins and out of the property deal. It is no surprise that so many developers and brokers have embraced this new generation of lenders like a breath of fresh air, and are excited to work with lenders that at last are able to use their own experience as developers to understand borrowers’ financial needs.
In summary, many players in the property market – developers, brokers, and professionals such as lawyers, accountants, and architects – have embraced the new wave of technological innovation in the lending market like a breath of much-needed fresh air.
Roxana Mohammadian-Molina is chief strategy officer at Blend Network.