Crowdfunding and the real estate industry

CrowdfundingImage Credit: Supplied

Crowdfunding has become a new path for real estate investors in several parts of the world, especially in the UK and US markets. Several real estate groups have already jumped on the bandwagon. With global players starting to adopt the platform, this could soon make a mark in the local and regional real estate markets as well.

Crowdfunding, by definition, is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet. This is already practiced in the technology and web retailing segments. The good thing is, the innovative platform does not recognize economic or geographic boundaries.

When it comes to the real estate market, crowdfunding should be a natural procedure. It should make use of the easy accessibility of a vast network of friends, family and colleagues through social media to attract realty investors. The mechanism has the potential to expand the pool of investors as funds can be raised beyond traditional circles.

Crowdfunding is not an entirely new phenomenon in the global real estate market. The platform has its own niche and strategy of attracting investments. It opens opportunities to a mass crowd of smaller investors. Developers can opt for it as a viable alternative to fund their projects. It will help them pull in high-level investments.

Recent reports reveal that some global players were in discussion with local developers about the possibility of crowdfunding. Investors in the property industry must understand its pros and cons. Although both the investors and developers can reap financial benefits from it, they have to share the risks as well.

The key attraction of crowdfunding in the real estate segment is that it helps numerous investors get access to the market on a small budget. They get to work directly with the developers and raise their voice in the process. Having access to a myriad of projects, they can select a particular project they want to invest in.

However, like other real estate investors, those under the crowdfunding platform also face the same issue of a fluctuating market. To be on the safer side, investors must conduct a thorough research on the platform and analyze opportunities from the investor’s perspective.

Handy Hints
• The UAE real estate market is currently toying with the idea of crowdfunding
• Investors who plan to adopt the strategy are advised to conduct due diligence
• Platform can help investors get access to property market on a small budget

Source: Yash Shah, Special to Properties
The writer is Property Sales & Leasing Manager, SPF Realty


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