Real Estate & Infrastructure Crowdfunding has established itself as a major game changer where the larger Real Estate industry is concerned. Crowdfunding involves the pooling of funds by multiple investors in a project. This form of crowdfunding is different from ‘rewards-based’ or ‘venture crowdfunding’ in terms of how investments are made, the kind of potential returns investors enjoy and also the level of risk involved.
By introducing technology-based solutions and removing some of the most challenging barriers to real estate investing, crowdfunding has injected some positive disruption that’s long overdue.
Changes to various international laws, now allow individual investors to have access to information that was hitherto exclusively reserved for institutional investors and generally, investments in African Real Estate through the crowdfunding platforms are open to any investor who can demonstrate that he or she has the experience and knowledge required to understand the investments being offered.
Additionally, one of the biggest stumbling blocks associated with private Real Estate deals is the high minimum buy-in that is often required to get involved. It is not unusual for investors to bring $100,000 to the table to participate. Real Estate & Infrastructure Crowdfunding, on the other hand, sets the bar much lower. Afriscaper, for example, features deals with a $1,000 minimum commitment.
Commercial Real Estate Crowdfunding platforms therefore allow individual investors to diversify their investment portfolio by providing pre-vetted projects in Africa (in partnership with PwC). Technology has also made it easy to invest in diverse geographical locations from the comfort of your home enabling foreign investors to generate a long-term source of income with a good degree of control over their investment. You also do not have to be a citizen or resident in the country of the investment location.
Compared to established markets, African Real Estate and Infrastructure deals are typically in the pre-construction stage where the Real Estate project will be developed from the ground up. In addition, Infrastructure Crowdfunding also involves investment in revenue-generating government projects such as roads, railways, bridges, etc. Whilst the risk is higher for these types of project, the return is typically higher too and this is one of the major reasons why returns from African Real Estate and Infrastructure Crowdfunding projects offer even higher returns than those which can be achieved from established markets.
Clearly, before making an investment decision with respect to investments on Crowdfunding platforms, potential investors need to carefully read the related documents and ideally also consult with a professional who can help them to understand and assess the risks associated with the particular opportunity. However, for investors and borrowers alike, Real Estate and Infrastructure Crowdfunding continues to be an exciting path worthy of consideration, and it represents an area which can have a positive and long term impact on the African continent.
To find out more, please contact Colleen McIntyre, Search Consultant at Executives in Africa – firstname.lastname@example.org, who would be pleased to make an introduction to Adebola Omololu, the CEO of Afriscaper.