Real Estate Crowdfunding: Everything Indian Investors Needs To Know

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Real Estate Crowdfunding: Everything Indian Investors Needs To Know

What is real estate crowdfunding, you ask? Remember how we used to save our pocket money to purchase a packet of chocolates when we were kids? Or how we would spend days looking for a birthday present for a close friend that was both reasonable and meaningful when there were discount-providing e-commerce companies in India? Our savings were sometimes insufficient to cover the purchase of a large bag of candy or an expensive T-shirt. What was the solution in such scenarios? We’d pool our resources, purchase a bag of chocolates together! Real estate crowdfunding is a method of investment in which a group of people invests a modest amount of money in a specific real estate venture. It assists in portfolio diversification and ensures a passive income.

Real estate has always been a terrific financial option for investors. Real estate is the safest and most effective means to attain financial independence. However, most people have been unable to purchase property since it requires a large sum of money. Real estate crowdfunding allows you to engage in complex projects that create substantial profits. Real estate crowdfunding has altered the face of real estate investing. Many real estate crowdfunding platforms have considerably reduced the barrier to entry for this sort of alternative investment, which was formerly reserved for only the most wealthy investors. For example, Assetmonk is India’s fastest-growing wealth-tech platform for real estate investments, offering personalized asset-backed investment options tailored for various financial objects with an estimated IRR of 21% p.a.

But, firstly, what does crowdfunding mean?

If you’re an entrepreneur, you may have some questions about it, such as “what is crowdfunding and how does it work?” You’ve probably heard stories about how a guy or a woman raised millions of dollars on the internet for the treatment of her father or other family members. This collection gets done through crowdfunding.

Some crowdfunding examples include recently, an 11-year-old girl in Hyderabad raised Rs. 6.2 lacs through community finance or crowdfunding to feed many underprivileged people who have lost their jobs due to the country’s corona outbreak.

Crowdfunding is a method of acquiring money in which tiny donations from many individuals get accepted. Crowdfunding first got utilized as a donation-based system. But owing to advancements in technology, it has embraced real estate crowdfunding investment.

And what are the types of crowdfunding, you ask? It is not a multidimensional chance to select the platform that best suits your project? It’s not a one-size-fits-all undertaking. Though there are hundreds, if not thousands, of ways to crowdfund, many of them fall into one of four categories: Donation-based crowdfunding, Reward-based crowdfunding, Equity crowdfunding, and Real estate crowdfunding are all forms of crowdfunding.

Now, what is real estate crowdfunding? 

What is crowdfunding real estate investing, you ask? Real-estate crowdfunding (also known as property crowdfunding) is a method of obtaining funds for real estate investment by engaging a group of investors and asking them to contribute a modest amount of money to a project. To put it simply, it is a method of obtaining cash that allows small real estate investors to fund large projects.

Let’s look at an example of real estate crowdfunding to comprehend the concept. Assume a real estate developer or experienced investor selects a commercial property in Bangalore’s finest neighborhoods. This asset now has a selling price of Rs. 4. crores but lacks contemporary amenities. Based on market research and other requirements, the developer/investor determines that if the property gets refurbished at a total cost of Rs. 3. crores and subsequently leased out, the asset might likely attain a market worth of Rs. 10 crores during the following 5-6 years. The problem now is that the developer/investor lacks the requisite funds to renovate the building. Rather than qualifying for a loan, the investor might transform this into a real estate crowdfunding opportunity, in which a group of investors or people contribute individually to the project.

It has two benefits. Builders can utilize the funds collected to create or renovate a complete real estate project. Investors can now become shareholders in assets that were previously impossible to buy as individuals, allowing them to diversify their portfolios.

So, is real estate crowdfunding a good investment?

The following discusses some of the benefits of real estate crowdfunding, which may help you determine whether this investment instrument is suitable for you.

  • Portfolio diversification: One of the most noticeable advantages of real estate crowdfunding is the ability to diversify your portfolio. By diversifying your portfolio, you effectively reduce the risk associated with a single investment by spreading that risk over other investments.
  • Accessibility: Real estate crowdfunding has significantly increased the accessibility of real estate investing. Private real estate investments were exclusively open to high-net-worth individuals with the necessary funds and contacts. These are no longer impediments to the entrance, thanks to changes in the legislation and the rise of internet crowdfunding sites.
  • Passive Income: Another appealing feature of investing in real estate crowdfunding is a passive income source rather than a typical real estate investment vehicle. You are investing with a third-party real estate developer that does all the labor when you participate in real estate crowdfunding. You are putting your confidence in the developer or operator to complete all essential tasks on schedule and within budget. As a result, you won’t have to deal with the stress of property management. It frees you up to concentrate on your other investing pursuits.
  • Minimum investment: You may have never been able to participate in real estate previously due to the amount of money necessary for a traditional real estate investment. But, real estate crowdfunding allows you to become a real estate investor due to the minimal investment size requirements. To invest in real estate, you no longer need tens or hundreds of thousands of dollars, as is traditionally necessary to acquire a house. If you are new to real estate investing, the smaller investment size allows you to “dip your toe in the water” or obtain better diversity.

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