Crowdfunding As an Alternative Source of Real Estate Finance

ESV George Okwudili Endelyn

The coming together of individuals, groups, family members, cooperatives, to raise funds for projects and specific needs is known as crowdfunding. Over the years, crowdfunding has become an alternative source of project financing, including real estate financing.

Unlike institutional project financing that has a lot of bottlenecks, crowd funding is easier to access and it has a lot of plethora of benefits. With the stringent measures being put to access mortgage loans in banks and non-banking financial institutions, crowdfunding becomes a reliable and available alternative source of funding for real estate projects.

Embarking on a big real estate project requires a lot of funds to successfully execute the project, most of these projects requires institutional funding to execute but unfortunately, the authorities concerned – mortgage institutions and commercial banks are not leaving up to expectations due to the unstable macroeconomic environment, fluctuating exchange rate, among other factors. This scenario has given room for crowdfunding to thrive as an alternative source of real estate financing in the face of the challenging macroeconomic crisis being experienced in Nigeria today. Even in other climes, where the economies are stable, crowdfunding as an alternative source of financing is beginning to gain ground like never before.
Among its many plethora benefits, crowdfunding does not require conditionalities in the disbursement of funds needed for real estate projects, all the individual needs to do is to be a committed member of the crowdfunding communities like family, cooperative societies, clubs, union, among so many others.

Risk sharing and risk management is reduced in the business of crowdfunding, there is always a higher chance of succeeding in real estate investment when the risk is shared and managed by all members of the crowdfunding community. Crowdfunding as the name implies is always characterized by a large number of people with a common interest. A source has it that over $45 billion was globally raised through crowdfunding for various projects in 2021including real estate projects. The report also has it that it is more efficient to mobilise funds through crowdfunding when compared to the traditional fundraising methods for projects.

On how real estate professionals can maximize the benefits of crowdfunding, at their various professional bodies, crowdfunding committees, clubs, and groups should form and mobilise funds for real estate project financing that will benefit members. One of the best ways to mobilise these funds is the floating of Micro Finance Banks that will cater for the needs of the professional members of the various professional bodies in the built environment and the real estate market space by extension. For instance, the Nigerian Institution of Estate Surveyors and Valuers (NIESV), which is one of the leading professional bodies in the Nigerian built environment can float NIESV Micro Finance Bank to provide project funds for its over 10 thousand members.

With the needed economic environment, crowdfunding can grow and become a most reliable source for project finance in the real estate industry. All professionals in the real estate industry should come together and encourage crowdfunding as an alternative source of financing their real estate projects.

ESV George Okwudili Endelyn is a registered Estate Surveyor and Valuer. He is the Principal Partner of George-Lyn & Co, a firm of Estate Surveyors and Valuers. He sends in this piece from Awka, Anambra State.