Last edited 05 Feb 2020

Real estate crowdfunding

Crowdfunding is the utilisation of a lesser proportion of capital from a large number of investors who are eager to fund a new business project. Crowdfunding makes use of the easily available and communicable social media networking websites and crowdfunding websites to contact investors and bring them and the entrepreneurs onto the same platform.

Real estate crowdfunding is a relatively novel concept that has aided real estate developers and firms to procure funding from a completely new group of financiers. Real estate crowdfunding tools can raise debt and equity funds from credited as well as non-accredited investors. These tools vary in terms of investment offerings, accreditation needs, and minimal investment sizes.

The global real estate crowdfunding market is predicted to be valued at approximately USD 13,207 million in 2018 and is expected to reach a value of around USD 868,982 million by 2027, growing at a CAGR of around 58.3% between 2019 and 2027.

The thriving commercial real estate activities across the globe have resulted in the massive need for private funding. This, in turn, has culminated in huge demand for crowdfunding activities prompting market growth. Online real estate is a growing component of the commercial real estate industry and is predicted to further drive business growth in the future. Fundraising activities are swiftly transiting online as real estate sponsors find it more convenient and faster compared to the offline mode.

Furthermore, a rise in the allocation of funds for commercial real estate events in emerging economies with the large-scale establishments of hospitals, clinics, and schools will further drive the expansion of the real estate crowdfunding industry.

Real estate crowdfunding has reduced fees and offers investors a choice of selecting particular assets that help in fulfilling their particular investment choices. However, low liquidity may adversely impact the growth of the market.

The growth of the segment is credited to maintaining the profiles by the institutional investors like banks, hedge and mutual funds, insurance firms, and pension funds.

The commercial segment is set to record highest CAGR. The segmental surge is credited to the massive demand for raising funds for the construction of schools, hospitals, and shopping centers in developing economies.

North America will lead the overall market growth in terms of revenue. The growth of the regional market is due to the presence of key market participants and huge crowdfunding from key financers in the region.

Some of the key players in the market include American Homeowner Preservation LLC, BrickFunding, Cadre, Crowdestate OÜ, CrowdStreet, Inc., Estateguru OÜ, Fundrise, LLC, Groundbreaker Technologies, Inc., M2CROWD, Bulkestate, REALCROWD, INC., ReInvest24, RM Technologies LLC, and Square Meter SAPI de CV.

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