Real Estate Crowdfunding Market
Segmentation by Investors (Individual, and Institutional); by Model (Lending, and Equity); by Real Estate Sector (Residential, and Commercial) – Global Demand Analysis & Opportunity Outlook 2019-2028
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Segmentation by Investors (Individual, and Institutional); by Model (Lending, and Equity); by Real Estate Sector (Residential, and Commercial) – Global Demand Analysis & Opportunity Outlook 2019-2028
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The global real estate crowdfunding market is segmented by regions into North America, Latin America, Europe, Asia Pacific, and the Middle East & Africa. Among the market in these regions, the market in the Asia Pacific is projected to hold the largest market share of 53.20% by the end of 2021. The growth of the market in the region can be attributed primarily to the growing number of commercial real estate activities in the region, backed by the increasing industrialization, and therefore the need for funding of different real-estate projects. Additionally, the growing popularity of lending-based platforms, along with the favorable initiatives of the government for crowdfunding regulations, are some of the additional factors anticipated to drive the market growth during the forecast period. CLICK TO DOWNLOAD SAMPLE REPORT
On the other hand, the market in North America is primarily driven by nations such as the United States and Canada, where the market in the U.S. held the largest share in the year 2019. The real estate crowdfunding market in Canada is projected to witness significant growth in the coming years on account of the increasing development of commercial real estate properties, along with the rising awareness amongst individuals from crowdfunding platforms.
The real estate crowdfunding market in Europe is primarily driven by nations such as the United Kingdom, Germany, France, Italy, and Spain among others. Among the market in these regions, the real estate crowdfunding market in the U.K. registered the highest share of 41.5% in the year 2019 and is primarily driven by the increasing investments in real estate debts, along with the growing interests amongst non-institutional investors for investing through crowdfunding platforms in the real estate sector, backed by the high returns expected from the sector, and the supportive regulatory environment in the region.
The study further incorporates Y-O-Y Growth, demand & supply and forecast future opportunity in North America (United States, Canada), Latin America (Brazil, Mexico, Argentina, Rest of LATAM), Europe (U.K., Germany, France, Italy, Spain, Hungary, BENELUX [Belgium, Netherlands, Luxembourg], NORDIC [Norway, Denmark, Sweden, Finland], Poland, Russia, Rest of Europe), Asia-Pacific (China, India, Japan, South Korea, Malaysia, Indonesia, Taiwan, Hong Kong, Australia, New Zealand, Rest of Asia-Pacific), Middle East and Africa (Israel, GCC [Saudi Arabia, UAE, Bahrain, Kuwait, Qatar, Oman], North Africa, South Africa, Rest of Middle East and Africa).
Crowdfunding is a new and revolutionary way for business owners to raise money for their business, not by asking one investor for a huge investment, but by reaching out to a large pool of small investors who contribute a small amount of money in real estate projects. Before the jumpstart our business startups (JOBS) act of 2012, investing in real estate was conducted only by investing in physical properties or investing in real estate investment trusts (REITs). With the growing awareness for crowdfunding platforms amongst the investors, they can now buy a portion of the real-assets instead of buying the whole property. Moreover, backed by the growing digitalization, along with the proliferation of advanced technologies in the real estate industry, real estate firms have shifted their preferences from the traditional way of raising large-scale investments by increasingly preferring digital funding procurement methods and other real estate crowdfunding tools that focuses on crowdsourcing for funding the commercial real estate projects. Consecutively, the increasing adoption of blockchain for private funding in commercial real estate activities is further projected to have a significant influence on the growth of the global real estate crowdfunding market during the forecast period. The market is further forecasted to cross USD 113,000 million by the end of 2021.
By Investors
The global real estate crowdfunding market is segmented by investors into institutional investors and individual or retail investors. Among these segments, the institutional investors segment is projected to hold the highest market share by the end of 2028. One of the recent trends in the real estate crowdfunding industry is the investments made by institutional investors, which include life insurance companies and pension funds. Institutional investors usually invest more than USD 10 million at a time which significantly helps crowdfunding platforms to raise millions of dollars at once.
The market is further segmented by crowdfunding model into lending and equity crowdfunding, out of which, the lending crowdfunding segment registered the largest market share in the year 2019. A lending-based crowdfunding platform is an alternative funding channel that permits household businesses and small businesses to be sponsored directly by a mass of investors. In lending crowdfunding, investment directly lends to the owner of the real estate assets. As a result, the individual does not receive any shares but receives a fixed return on the project's interest rate as per their investments.
The market is also segmented by real estate sector into residential and commercial sectors. Among these segments, the residential sector is projected to grab the largest market share by the end of 2021. The residential sector emphasizes the buying and selling of assets and properties used for homes or non-professional purposes. The residential real estate sector includes apartments, single-family homes, condominiums, planned unit developments, and others.
Growth Indicators
Massive Construction Activities Witnessed in Both Commercial and Residential Sectors to Expand the Growth of the Market
In recent years, the real estate sector has observed a significant growth in the number of commercial real estate activities, including the development of commercial structures, buildings, and others, such as hospitals, clinics, apartment buildings, duplexes, schools, and others. With such developments, there is a raising need for allocating funds for promoting these events, which is anticipated to promote the growth of crowdfunding platforms in the coming years. In addition, construction loans via crowdfunding platforms are emerging as a new source of funding for major construction sectors, including residential and commercial sectors, owing to which, investors do not need to buy the entire property. Instead, they can earn a portion of profits generated from the real estate investment, which can easily be used in construction activities.
Growing Implementation of Blockchain Technology in Crowdfunding Platforms to Drive Market Growth
Blockchain technology has made real estate transactions more straightforward and faster than ever. It is used increasingly for developing smart contracts and tokenization. Blockchain-based real estate crowdfunding encompasses a regulated, decentralized listing, property financing, and managing platform. It reorganizes rental agreements, assets, property task management, purchase/sale agreements, and related services on the blockchain. Blockchain technology facilitates peer-to-peer financing for real estate projects and reorganizes real estate necessities by permitting investors and proprietors to share funds and data efficiently and securely. The technology helps to eliminate intermediaries, reduces deception & frauds, and makes information more manageable. Further, blockchain real estate crowdfunding platform fast-tracks risk evaluation and investment proceedings. Such factors are anticipated to drive the growth of the global real estate crowdfunding market in the coming years.
Barriers
Low Liquidity of Investments, along with Regulatory Restraints and Risks Involved in Crowdfunding are anticipated to hamper the Market Growth
As securities purchased on equity crowdfunding platforms are highly illiquid, thus, exit options are significantly less or may not even really exist, just as the case for traditional venture capital investors. Crowdfunding investors may have to wait several years longer for their investment to pay off as the company take years to realize its potential. Additionally, growing instances of crowdfunding frauds reported in several nations worldwide, along with the high risks involved in these investments are some of the factors anticipated to hamper the market growth.
Impact of COVID-19 on the Global Real Estate Crowdfunding Market
Unlike other business sectors, the real estate sector has also been largely impacted by the coronavirus pandemic. The crisis has shifted the focus of the investors to invest more in essential goods and less in non-essential goods. Although, as investments in the real estate crowdfunding platforms start with a minimum of around USD 100, hence the flow of investments was not majorly impacted, therefore resulting in a steady growth of the market. The investments for real estate properties were further aided by the shift in preferences for online operations of businesses as social distancing had made it almost unmanageable for real estate professionals to show real estate properties physically. However, the pandemic has led to a substantial decrease in the transaction volume of the crowdfunding platforms, which resulted in lowering the operational cost of businesses by reducing the employees working in the sector and further adopting strategies that can help them run their businesses.
Some of the prominent players in the global real estate crowdfunding market are CrowdStreet, Inc., RM Technologies LLC, RealCrowd, Inc., Groundbreaker Technologies, Inc., Groundfloor Finance Inc., DiversyFund, Inc., EstateGuru OÜ, AHP Servicing LLC, Crowdestate AS, and Fundrise, LLC.
In 2023, market players might incur losses due to huge gap in currency translation followed by contracting revenues, shrinking profit margins & cost pressure on logistics and supply chain.
Controlling Inflation has become the first priority for global economies from last quarter of 2022 and to be followed in 2023. With skewed economic situations, rise in interest rate by governments to control spending and inflation, spiked oil and gas prices, high inflation, geo-political issues including U.S. & China trade war, Russia-Ukraine conflict to intensify the global economic issues.
The interest rates in the U.S. may be less sensitive in 2023 as compared to 2022; sigh of relief for businesses. Positive business sentiments, healthy business balance sheets, growth in construction spending (private construction value in 2022 stood at $1,429.2 billion, 11.7 percent (±1.0 percent) above the $1,279.5 billion spent in 2021, Residential construction in 2022 was $899.1 billion, up by 13.3 percent (±2.1 percent) from $793.7 billion in 2021, non-residential construction touched $530.1 billion, 9.1 percent (±1.0 percent) above the $485.8 billion in 2021.) showcases minimal impact of recession in the country.
Similarly, spiked spending in the European and major Asia economics including, India, China & Japan to showcase less impact on the global demand.
Ans: Massive construction activities witnessed in both commercial and residential sectors around the world, along with the growing adoption of blockchain technology for crowdfunding, are some of the major factors driving the market growth.
Ans: The market is anticipated to attain a CAGR of 33.4% over the forecast period, i.e., 2020-2028.
Ans: The market in North America region is projected to provide more business opportunities in the coming years and is primarily driven by nations such as the United States and Canada.
Ans: The major companies in the market are CrowdStreet, Inc., RM Technologies LLC, RealCrowd, Inc., Groundbreaker Technologies, Inc., Groundfloor Finance Inc., DiversyFund, Inc., EstateGuru OÜ, and others.
Ans: The company profiles are selected based on the revenues generated from segments, geographical presence of the company which determine the revenue generating capacity as well as the new products being launched into the market by the company.
Ans: The real estate crowdfunding market is segmented by investors, model, real estate sector, and by region.
Ans: The institutional investors segment, which is a sub-segment under the investors segment, is projected to hold the highest market share by the end of 2028.
Ans: High risks involved in crowdfunding owing to the numerous frauds reported in the recent years, is one of the major factors estimated to act as barriers to the growth of the market.
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