Explained: Role of Artificial Intelligence and Machine Learning in real estate sector; advantages over Robotic Process Automation algorithms
According to a research artificial intelligence could generate more than $15 trillion for the global economy over the next decade. And investors have taken note of this and especially, early-stage investors are increasingly looking for startups that develop tech solutions which facilitates easy processes
The real estate sector has proven to be making progress in adapting to technology and is slowly moving towards a data-driven approach. The use of AI & ML in businesses invariably simplifies the core processes and improves overall quality of work. Besides aiding in managing large sets of data, AI also streamlines functioning and thus drives decision making. According to a research artificial intelligence could generate more than $15 trillion for the global economy over the next decade. And investors have taken note of this and especially, early-stage investors are increasingly looking for startups that develop tech solutions which facilitates easy processes. Aryaman Vir, Founder & CEO of MYRE Capital shares his knowledge on how Artificial Intelligence and Machine Learning are revolutionizing real estate sector and their advantages over Robotic Process Automation algorithms in the complete process.
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"The most recent large scale technological adoption that drastically improved the efficiency of the real estate sector was the integration and application of RPA (Robotic Process Automation) algorithms. The one major limitation of RPA’s is that it mimics human behavior to events that are deterministic in nature – such algorithms are unable to address variable outcomes. RPA solutions are largely based on pre-determined events and actions and hence are dependent on the comprehensiveness of the outcomes and situations considered," Aryaman Vir opines.
He adds, "Artificial intelligence is a disruptive technology that can supplement RPAs to mitigate the shortfalls. AI & ML algorithms entail the simulation of human intelligence processes by machines and automation as opposed to simulation of human action by RPA’s. The primary advantage of AI is the ability to understand and address varied outputs whilst eliminating bias and subjectivity in the decision-making process. The very core distinction is that ‘RPA uses structured inputs and logic, while AI uses unstructured inputs and develops its own logic’."
Vir further adds, "Artificial intelligence sounds futuristic but the applications of this technology in the real estate sector is understated and in its nascent phase. Some of the recent areas in which AI & ML are being explored include:
1) Identifying undervalued real estate assets:
Algorithms and Machine Learning in AI platforms are great at parsing huge amounts of data to determine patterns, relationships and correlations across a wide scope of parameters and variables. The ability to identify the variables and evaluate their influence on multi-scenario probabilistic models has transformed the asset selection process to become more quantifiable than subjective in nature. Since well-designed AI algorithms constantly test the impact and feasibility of different parameters, the actionable insights gained can trigger a ‘butterfly effect’, that is, the effect where a small factor can lead to large-scale and unpredictable variations in a future complex system.
AI can help determine rates of a property using “predictive analysis” algorithm. Predictive analysis algorithms provide the probability of certain events occurring by examining the available information such as income distribution of individuals in the vicinity, changes in demographic pattern of the micro-market, projection and viability of future competitive supply, and others. This ultimately assists in deciding the true intrinsic value of a property.
2) Building Maintenance and cost optimization:
In real estate, one of the age-old problems has been ensuring a high occupancy rate. Occupancy rate and tenant retention are closely related to the upkeep of the building and the competitiveness of the rentals compared to the market. Various AI solutions are being explored to optimize both parameters – rentals and building upkeep.
Rentals are a function of the bottom line cost of maintaining a premises. If a landlord is able to keep costs low, the same usually trickles down to lower rentals for the tenant making them stickier to the premises.
Using AI, one can identify the underutilized and overutilized areas in a building and can accordingly evaluate a broad spectrum of data points to develop an optimal monetization strategy or cost reduction methodology. According to the Forbes Technology Council, using predictive AI can save billions of dollars and reduce expenses up to 40%.
According to the CRE innovation report 2020, artificial intelligence has 46% more potential for significant cost savings and operational efficiencies in comparison to last year and will create major disruptive impact to extent of 43%. The report also states that automation in the real estate will provide efficient property management, budgeting & forecasting, performance management, valuation process and transaction process.
3) Qualified Lead generation:
A critical part of the real estate cycle is the identification, management, and closure of a qualified lead. Traditionally this process has been majorly driven by manual processes. With the introduction of AI algorithms, PropTech firms are using such algorithms to supplement the investments team to optimize their time allocation and increase their conversion ratio. Rather than pursuing every lead, AI algorithms evaluate each lead basis thousands of data points and categorize them in a ranking of conversion probability. Real Estate Firm, Anarock has recently announced the launch of their AI integrated tool, Astra. Astra aims to accelerate housing sales using algorithm that analyses customer behaviour data to yield accurate leads, thereby boosting marketing efficiency, reducing costs, and delivering an engaging user experience to developers and their customers. It is expected to boost primary housing sales by up to 15%."
Concluding the explanation on role of AI and ML in realty sector, Vir says, "Thus, it is safe to say that the impact of artificial intelligence in the real estate sector is only looking to grow exponentially in the coming decades by providing in-depth real estate intelligence. With the continuous digitization of various sectors, the industry players are recognizing the immense potential of AI. The adoption of AI will positively impact efficiency, costs of management, transparency, and most importantly, assessment of assets. Certainly, artificial intelligence revolution has arrived and it is here to stay."
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