Navigating the real estate investment landscape has evolved with the emergence of crowdfunding platforms, offering new avenues for both seasoned investors and newcomers alike. These platforms provide an accessible entry point into real estate investing, allowing individuals to diversify their portfolios with fractional ownership of properties across various locations and asset classes. Alternatively, builders can raise capital through private placement of debt to private investors.
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The Indian commercial real estate market is undergoing a significant transformation, opening doors for retail investors who aspire to participate but face financial constraints. The growth of crowdfunding platforms has been facilitated by the digital revolution, an increase in smartphone usage, and growth in investors who are passionately seeking opportunities apart from traditional investment options.
A study conducted by Knight Frank India and the Confederation of Indian Industry (CII) says that the real estate market in India is projected to reach USD 1.3 trillion by the year 2034. Besides, it is expected to contribute around 13% of the GDP in 2025. The demand for coworking spaces, luxury estates, and residential real estate is tremendously increasing in India.
In these platforms, Investors connect through the Internet and invest in products of their choice. Many small and mid-sized entities can generate and pool money through these crowdfunding platforms to facilitate their funding without solely relying on traditional options. Real estate crowdfunding breaks geographical barriers, connecting you to diverse customers. It helps builders sell inventory faster by reaching multiple buyers at once.
The rapid emergence of tech start-ups has contributed to their exponential growth. Crowdfunding platforms dedicated to specific industries have become the current trend.
Types of Crowdfunding
- Equity crowdfunding involves raising capital online where the founder issues public shares in exchange for investments, offering scalability and convenience to companies seeking funds from private individuals and unlisted shares. It carries more risk as returns depend on the property rates.
- Debt crowdfunding, allows raising money through online platforms via small loans with varying interest rates, offering a simpler application process compared to traditional methods.
What Retail Investors Get Through These Platforms
There has been a noticeable uptick in the participation of retail investors in the real estate crowdfunding market. Crowdfunding allows investors to diversify risk and access high-yield projects. Lower minimum investments and greater transparency democratize real estate investing, giving individuals more flexibility and control over their financial future.
- Higher Returns: As they entail comparatively higher risk, the returns are typically higher than traditional investments like FD’s.
- Better Access: Get access to non-conventional and innovative real estate investments that would otherwise not have been possible.
- Track Progress: Investors can monitor progress and make a better selection by comparing different investments.
- Portfolio diversification & Ease of Management: These platforms offer portfolio diversification to reduce risk and exposure to real estate investments without the hassle of managing the investments themselves.
- Lower turnaround time: Real estate crowdfunding offers shorter transaction and commitment times than traditional investments.
Choosing the Right Crowdfunding Opportunity
When selecting a real estate crowdfunding platform, retail investors should consider several critical factors:
- Platform Reputation and Track Record: Investigate the platform’s history and the experience of its management team. Platforms with a solid track record of project completions and consistent payouts are preferable.
- Investment Offerings: Look at the types of investments on the platform. Some specialize in residential, others in commercial, and some offer a mix. Assess whether the investment products align with your investment goals.
- Transparency and Communication: A good platform will offer thorough documentation on its offerings and maintain open lines of communication with its investors. Regular updates on investment performance and prompt responses to queries are essential features.
- Risk Management: Evaluate how each platform handles risk assessment and management. Understanding the measures in place to protect investors, such as asset diversification, underlying security and due diligence processes, is crucial.
- Fees and Structure: Understand the fee structure, which can include management fees, fund expenses, and performance fees. These fees can significantly impact your overall return.
- Minimum Investment and Access: Consider platforms that match your budget. Some platforms are open to all investors, while others are restricted to select few only.
- User Reviews and Community: Checking reviews and the community’s feedback can provide insights into the platform’s reliability and customer service.
There is no investment without risk and real estate is quite a complex industry, requiring a comprehensive understanding before making right investment decisions.
-The author is founder and CEO, Assetmonk. Views expressed are personal.
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