Real Estate Crowdfunding in France: current landscape, challenges and opportunities
One year ago, France set up a regulatory framework for crowdfunding. Since then, crowdfunding has grown quickly. Today a large number of websites aims at letting the crowd fund real estate projects. Real estate crowdfunding has started.
The multiplication, in a few months, of the number of crowdfunding platforms dedicated to the financing of real estate projects raises many challenges in terms of regulation, micro and macroeconomics, and economic policies. A comprehensive study was required.
Real estate crowdfunding is disruptive because it concerns:
- A new way of business financing. Unknown 4 years ago, crowdfunding has displayed a 3-digit annual growth for the past 3 years. Observers expect this source of funding to be a significant and strong alternative or complementary source of financing next to traditional sources, in particular as bank lending is more and more constrained by regulation.
- A main sector of the French economy. The real estate sector, including construction, represents nearly 2 million jobs in France. It was strongly affected by the economic crisis, resulting in severe shortages of private and social housing in densely populated areas.
- A major part of French households’assets. French people favor investment in real estate, which they consider to be riskless. Approximately 67% of the global French household wealth consists in real estate investments, far ahead of life insurance (10.8%) and riskfree liquid assets (8.8%). Savers are now looking for better returns as regulated savings accounts like Livret A returns only 0.75%, and soon less.
A strong development of real estate crowdfunding will have major consequences on economic growth, French employment and the structure of French savings.
Looking at the many stakeholders of the sector, the emergence of the real estate crowdfunding brings the following issues:
- Real estate developers: is this new funding source of interest? To what extent can it be complementary to other ways of financing? How can a developer choose the right crowdfunding platform and entrust it with a project to develop its business and manage its corporate image?
- Managers of real estate funds and real estate investment trusts: Could real estate crowdfunding help retail investors acquire a real estate portfolio? Will they delegate the management of this portfolio to your company or is real estate crowdfunding a direct and strong concurrent for your products?
- Crowdfunding platforms and banks: is this new type of financing dedicated to real estate able to help you grow your current business? Which type of real estate crowdfunding should you choose? Which regulation applies? How can make your business model competitive and sustainable?
- Intermediaries, IFAs: how can you manage this new type of corporate finance? How should you drive your customers towards this new asset class? How could it contribute to the development of your business? How can you choose the right crowdfunding platform and be compliant with the relevant regulation?
- Investors: how can you select the right crowdfunding platform according to your personal needs and your financial asset portfolio? How should you select projects? How can you better understand your crowdfunding investments, assess the level of risk and optimize your return?
- Legal advisors: are current regulations adapted to this new mode of financing? How should you improve your support and legal advice to the various stakeholders in this market? How can you contribute to the general interest and promote a sustainable development of this new field?
Céline Mahinc and Chloe Magnier help answer these questions through a comprehensive and exhaustive study of real estate crowdfunding, which includes:
- A complete panorama of French platforms and a review of the practices of each of them;
- A detailed analysis of regulations that govern real estate financing through a web platform;
- Guides of good practices for the various players in this new market such as companies looking for funds and investors;
- A prospective outlook for the economics and regulation of this new mode of financing.
List of the platforms included in the study:
Communication and public relations
The study and its findings were brought to the attention of the legislators and regulators:
- Ministry of housing: Office of Sylvia Pinel
- Ministry of economy, industry and digital: Emmanuel Macron and Axelle Lemaire firms
- Ministry of finance and the public accounts: Cabinet of Michel Sapin
- Ministry of ecology, sustainable development and energy: Ségolène Royal Cabinet
- Presidency of the National Assembly and the Senate
- AMF, Capra & Bank of France
December 15, 2015, the study was presented in the first part of the great debate of end of the year of the ANACOFI.