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Crowdfunding is a new disruptor in commercial real estate

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You don’t have to be rich to invest in property

Appealing for public funds online and via social media platforms is being seen more regularly as people look for assistance in funding anything from medical treatments and charities to entrepreneurial ventures and travel dreams.

In many cases, these initiatives meet their goals. It is no surprise then that crowdfunding – the term given to funding a project or venture by raising small amounts of money from a large number of people – has found its way into the commercial real estate industry.

This movement is now listed as a disruptor to South Africa’s commercial property market. Previously, investors with available funds or collateral for a bond were the only ones able to purchase high-end commercial property, but the advent of crowdfunding has changed that, says Leon Breytenbach, national manager of the Rawson Property Group’s commercial division.

“Now small investors, collaborating with others, can pool their resources to make large investments or enable a developer to embark on a project… This is revolutionising property development and the commercial property investment market.”

In South Africa though, it is still an “unknown” for most, says Slaven Gajovic, founder and chief executive of Maximum Group, of which Real Estate is a subsidiary. That said, crowdfunding is “definitely” growing in popularity.

“Crowdfunding services, in general, are taking off and becoming more common… we have definitely had more online enquires then we had two or three years ago. People are coming forward wanting to explore alternative funding.”

Gajovic adds the property development industry is increasingly using informal crowdfunding models as part finance for developments. Stokvels too are “natural crowdfunding models” that have been used for generations by many black South Africans. 

“Crowdfunding is the future. What it needs though is a blockchain capability for traceability, measuring and security. We are working on that.”

A 12-apartment development in UK’s Sheffield area is to be funded by crowdfunding. Picture: UOWN

A 12-apartment regeneration project in Sheffield in the UK has just been launched and will be funded by the crowdfunding platform UOWN. The project is expected to involve money from 200 people investing from as little as £1 (about R19) to earn returns of about 15% per project.

On its website, the company markets its platform saying: “With UOWN you can invest with as little as £1, but the real benefit of this property crowdfunding model is that… we know how to manage properties, so you don’t have to, and ultimately, you can exit on your own terms, provided there is a willing buyer at your desired price.”

Real estate crowdfunding is also creating waves in the US property market. For decades, only Wall Street and the “uber-wealthy” were able to invest in companies for an equity stake, so Main Street figured a way around it, says Bloomberg.

“Crowdfunding connects startups and non-profits that need funds for their ideas with individuals who have money and believe in them. If done right, it can be very rewarding.”


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