Finance Monthly September 2021 Edition

56 www.finance-monthly.com INVESTMENT - REAL ESTATE CROWDFUNDING New EU regulation bolsters the market Faced with substantial industry growth, the European Union has decided to implement regulatory actions that will formalise the service provision process for crowdfunding and widen the potential pool of investors exponentially. For Jatin Ondhia, Co-founder and CEO of Shojin, the regulations are a necessary step to gain new economic opportunities: “At times, the regulatory costs and process can become burdensome, but they are essential if we want this market to grow.” Per the regulations’ due diligence requirements by platforms, investors will feel secure in their investment decisions. Terms on suitability and appropriateness will further enhance that sentiment. New passport and authorisation processes will make sure that platforms are held accountable for their listings and work in the best interest of their clients. Under the new scheme, real estate crowdfunding platforms can collaborate seamlessly with developers and construction corporations across the European continent if their projects total under €5 million. Given that the regulation works to rule out non-compliant practitioners, there will be fewer market participants— but those participants will present safer investment opportunities, according to the Latvian crowdlending platform LendSecured. “We find it more complex to spot deals that suit the vetting process. The volume might be smaller, but you can be sure that it has the highest quality,” explains Nikita Goncars, CEO of LendSecured. The unrelenting interest of new retail investors will bring liquidity to the market and entice developers. Crowdfunding platforms increasingly make use of the power of collaborating Shojin provides global investors with direct access to institutional- style debt and equity investments in the UK. Crowdfunding platforms like Shojin work best when they can balance the number of investors with a high deal flow. “Sometimes, there is an imbalance due to the economic and societal environment. This is where collaboration between platforms can be extraordinarily effective,” according to Jatin Ondhia, CEO and Co-founder. As crowdfunding gains popularity, more and more high-quality platforms will operate in the industry. Increased cash flows and investments deepen the liquidity pool and broaden the range of projects that can meet investors’ and developers’ requirements. Recently, most crowdfunding platforms have felt the market is too fragmented. To become a mainstream marketplace, the sector needs to attract a much broader crowd and cooperative market opportunities. In addition, the associated costs with new EU regulations may leave several companies in a difficult position. Thus, collaborations of various platforms play a vital role in the sector. Collaboration is not simply a matter of costs but combining expert knowledge and business strengths: If the market specialists blend their skills and help each other out, this will lift the whole industry to a higher level. Potential joint areas include tech development and research to understand and predict the market’s evolution better. The EU regulations hit the point of the time. Max Crowdfund, a Dutch crowdfunding platform, forecasts that if real estate crowdfunding continuously grows into the mainstream, cross-border investments and the international interest in the EU market will “Due to the global pandemic, interest rates have been lowered worldwide to stimulate consumption As a result, banks fear the trend going towards negative interest rates.”