In spite of a year 2020 marked by the health crisis, with construction sites being interrupted for several weeks, real estate crowdfunding held up well.
If you want to find more details about the real estate crowdfunding sector in 2020 and if it was impacted by the coronavirus pandemic, download for free the Born2Invest mobile app. Our companion app brings you the latest finance news in the world so you can stay on top of the market.
Real estate crowdfunding: functioning and risks
Until recently, investing in real estate development was essentially reserved for institutional investors. In 2010, real estate crowdfunding appeared and made this type of operation accessible to individuals from only about $1.200 (€1.000). The principle consists in bringing together several individuals who invest together in a real estate transaction. The crowdfunding platform, approved by the AMF, selects real estate development projects and organizes the call for funds from individuals. It presents the project to individual investors, the terms and conditions of the investment (duration, rate of return, guarantees, risks, and others). The investment is made in the form of a loan / bond and the funds collected are used to carry out the operation. At the end of the operation, each individual recovers the amount invested plus interest.
This type of investment involves certain risks. First of all, a risk of default: the promoter is unable to repay the loan and the savers lose all or part of the sums invested. There is also a risk of late repayment: the real estate project is delayed and the saver is repaid after the date initially planned. However, in this case, the wait is rewarded since interest continues to accrue on the months of delay.
Real estate crowdfunding has resisted well to the health crisis
With the first containment, the construction sites were interrupted on March 17th and gradually resumed in mid-April. Some projects financed via crowdfunding platforms had therefore been delayed. For the second containment, the construction sector is benefiting from government support: a new health protocol has been put in place, thus ensuring that there will be no interruption in activity. However, the delay caused by the confinement cannot always be made up for.
Nevertheless, crowdfunding has held up well in this very special year of 2020. According to the HelloCrowdfunding real estate crowdfunding barometer, in 2020, real estate crowdfunding platforms financed 530 projects, a stable figure compared to 2019 (547). However, the average amounts raised per transaction are 30% higher in 2020 $985,370 (€801,453) than in 2019 $843,082 (€685,510). The total collection for the year 2020 increases by 27% compared to 2019 with $580 million €472 million.
The average rate of return distributed to individual investors is also stable at 9.4%, as is the average duration of projects (21 months).
At the end of December, out of a total of 1,937 projects, 48 are currently in arrears and 833 have been repaid.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in BOURSORAMA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
How to optimize your website for local search
It’s so crucial to focus your marketing efforts on getting local website traffic if you run a store-front business or...
European companies ahead of US in ESG ratings
Even before Directive No. 2014/95/EU on non-financial reporting went into effect in Europe, between 2011 and 2017, nearly two-thirds of...
An impressive number of fundraising campaigns to halt the pandemic were launched in Italy
Over $30.4 million (€25 million) for the Covid-19 emergency. This is how much has been raised through the main crowdfunding...
The digital transformation of the health sector must be based on innovation
Regarding the financing of these initiatives, Jorge Morillo, director of Institutional Relations and Digital Administration of SAP Spain, spoke about...
Agriculture: the Spanish sector fears its Moroccan rival
Spanish producers accuse the new food chain protection project of benefiting Morocco's agricultural export sector. According to their prognosis, Moroccan...