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Crowdfunding real estate in France: When participative financing builds homes
No longer merely the realm of tech start-ups and innovative consumer products, crowdfunding is increasingly used in the French real estate market. In the past couple years, several building projects have seen the light thanks to participative financing.
The French real estate sector has found an innovative way to source capital while involving communities in urban development. Crowdfunding is slowly becoming a fairly common method for developers to fund their projects. Last year alone, 117 building projects were financed by private individuals with 30 million euros raised via crowdfunding platforms.
One such project is a building in Chelles, in the Seine-et-Marne department near Paris, which will host 51 social housing units once completed in mid-2016. Construction began in October thanks to one million euros collected by 278 individuals, some investing as little as 1,000 euros.
23-year old Yohan Laloum is one investor in the project. Drawing from his savings he invested the minimum sum of 1,000 euros in the building project. He told France 3 that since the housing units were already pre-sold “there is a definite guarantee on investment.” He also sees an advantage in participating in a project that will provide low-income people with brand new housing. In twelve months time Laloum and other investors in the housing unit will recover their investment with a 9% return.
Stéphanie Savel, of the Wiseed crowdfunding platform who hosted the Chelles building project, believes that participative financing draws its success from “a desire from individuals in France to give meaning to their savings.”
There are risks of course, as in any kind of investment. Extended construction schedules cause delays on money being paid back and rising construction costs may lead to a decline in profitability.
Nonetheless it remains an attractive investment opportunity for many individuals. In the case of the Chelles building, the amount necessary for construction to begin was raised in a mere four days. It was the first time in France that social housing was fully funded by small shareholders.
According to Souleymane Galadima, CEO of Wiseed, individual investors are attracted to participatory financing real estate for two practical reasons: a profitable yield of 9% for one, as well as the concrete advantage of seeing the project invested in being built and used. He mentions a similar project on the Wiseed online platform that managed to raise 670,000 euros in the space of a few hours.
Another real estate crowdfunding platform doing well of late is Anaxago. At first the website mainly featured start-ups, but decided in October of 2014 to offer its contributors the opportunity to invest in real estate projects throughout France. Since then over 14 million euros have been raised from 650 contributors enabling 25 real estate projects to be built.
According to Anaxago, real estate crowdfunding contributed to building around 2,400 new homes in France last year — within 117 building projects — as well as creating or preserving over 4,800 jobs. Projects funded by Anaxago have allowed investors returns of between 8 and 12% per year over periods of 12 to 36 months. CEO of Anaxago Joachim Dupont describes his website’ success — as well as that of the other 14 existing platforms — as a win-win. “Investors have found an innovative manner of finding profitable investments and developers have gained new financial support,” he says.
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