There are many articles written, including a few of mine, about the new funding craze – Crowdfunding.
For those new to this, crowdfunding is based on the concept where individuals – friends, family, the rich and the poor – have equal opportunity of investing in a project. The original model was started by American platform Kickstarter (http://www.kickstarter.com) and varied by others such as Indiegogo, Rockethub, Pozible (Australia), etc. During this period and up until early this year, Equity based platform were being restricted due to laws that did not allow it; however, since the Jumpstart Our Business Startups Act (JOBS Act) was signed into law in April 2012 by President Obama, American platforms have jumped onto the bandwagon and are applying the concept to practically all spheres of industry and business. One such area is the real estate industry.
Since easing the rules regarding equity funding in the US, the real estate sector has benefited more than any other industry area, when it comes to sheer number of funds raised. In terms of numbers alone, there are more than 20 real estate crowdfunding platforms in the US. The notable ones include Fundrise, Realty Mogul, iFunding, CrowdStreet, Crowdbaron, Collarperty, Groundbreaker and Realtyshares. These are all American. Realty Mogul alone has raised in excess of $39million since 2013, funding assets in excess of $313million. IFunding has raised funds to finance real estate assets to the tune of $328million in value. The numbers keep getting exciting.
In the UK, which has become the defacto market after the US, because of its Silicon Roundabout (where our offices are), there are a few real estate platforms springing up, with less imaginative names such as Propertycrowd, Crowdfundproperty and Propertypartner. Indeed there are a few springing up in many other parts of Asia and Australia. iFunding, the US platform now has branches in Asia (iFundingAsia).
Africa’s Development Funding Crisis.
Question is: will peer-to-peer lending or equity based crowdfunding work for African projects? Apart from a scanty number of crowdfunding sites springing up in Africa, which is nothing really to write home about, I sincerely think that Africa is where this concept can really take off big time. In the real estate sector, it is easy for investors/lenders to advance monies to projects whose longevity is a maximum of 36 months. With returns ranging between 20-30% on average, this is a no brainer for investors.
There are many property developers with good business models in Africa, who just require short term funding. Unable to borrow from local banks due to the high interest costs, sometimes up to 31% on the local currency or 20% on the dollar rate, Property developers in Africa are now looking for alternative, cheaper ways of borrowing money to advance their objectives. With the huge funding gap in the real estate sector, any platform that will help raise development funding for developers will be a welcome relief to the industry in Africa.
Step Up…Property Investor Africa!
As I said, Property Investor Africa started from our offices near where they call “Silicon Roundabout” in the UK. We cannot therefore be left out in this innovative funding craze. We are about to launch Africa’s first real estate crowdfunding platform via our original website http://www.propertyinvestorafrica.com. While we prepare to launch, we are aware that being an African platform, lots of investors will be more probing of our objectives and methods than usual. But we are determined to break this glass ceiling and make it work for our teeming developers in need of funding in Africa.
Issues such as: security of payment, regulatory issues, how will we ensure that funds raised are applied to the projects, and how investors will be paid back their capital and interest, are all being addressed.
However, we will welcome your feedback, comments and suggestions on what you will like to see being incorporated into our real estate crowdfunding platform, before we launch. Please address all emails to us at: firstname.lastname@example.org
Quote of the day:
“…we are aware that being an African platform, lots of investors will be more probing of our objectives and methods than usual. But we are determined to break this glass ceiling and make it work for our teeming developers in need of funding in Africa”
Douglas Oppong is Founder and CEO of Property Investor Africa. He consults on finance, infrastructure and
real estate projects for governments and companies doing business in Africa’s.