The health crisis has hit the entire real estate market and more particularly the real estate development sector. As a result of the containment measures, construction sites had to be interrupted on March 17th for several weeks. How has the real estate crowdfunding sector been affected by this crisis and what will be the consequences for savers in the coming weeks?
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The risks of investing in real estate crowdfunding
When a property developer launches a construction project, it sets up a company dedicated to managing the construction and marketing of the real estate program. To finance itself, the company borrows from individual investors via the real estate crowdfunding platform. In return, savers recover their investment at the end of the project, plus loan interest.
The two main risks of this type of investment for the saver are the risk of default (the developer is unable to repay the loan and the savers then lose all or part of the savings invested) and late repayment (the real estate project is delayed and the saver is repaid after the date initially planned).
What is the impact of the health crisis on the real estate crowdfunding market?
With the containment measures, construction sites had to be interrupted on March 17th for several weeks, only to resume gradually in mid-April. Some projects financed via crowdfunding platforms have therefore been delayed. In addition, since investors are only repaid at the end of the project, they will have to wait before they can recover the sums lent and the interest.
“Projects that were to be repaid between April and June will be four months late on average,” explained Jérémie Benmoussa, chairman of the management board of the Fundimmo platform. However, the wait will be rewarded since “interest continues to accrue on the months of delay” he said.
The figures at the end of June
It will, therefore, be necessary to follow the evolution of the overdue rate and the default rate over the coming months to really measure the impact of the health crisis on the real estate crowdfunding.
At this stage, according to the latest figures available on the HelloCrowdfunding website, the market is doing well. Between January and June 2020, real estate crowdfunding platforms have enabled projects to be financed to the tune of $178 million (€159 million), i.e. 13% more than in 2019 over the same period.
The average amount raised is up 23% compared to last year $865,589 (€772,282 on average). The average rate of return was stable at 9.3%, as was the average project duration (21 months). The average market delay rate is around 3% and the default rate is 1%.
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First published in Boursorama, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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