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 makes 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.
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.
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.
Appraisal. (2021). Discover your new edge in-home pricing: Artificial Intelligence. Retrieved from https://www.appraisal.ai/
Dr. N. B. Chaphalkar, S. S. (2013). Use of Artificial Intelligence in Real Property Valuation.
Esri. (2021). Property Value Analysis. Retrieved from https://www.esri.com/en-us/industries/land-administration/strategies/value-analysis
Julio Gallego, M.-E. (2004). ARTIFICIAL INTELLIGENCE APPLIED TO REAL ESTATE VALUATION.
P.R. (2021). What Affects The Price Of A House?Retrieved from Property Road: https://www.propertyroad.co.uk/what-affects-the-price-of-a-house/