The concept of raising taxpayer funds for an initiative has worked well in the world of technology and other areas. But will it benefit the Indian real estate market? Read on to find out more about this exciting concept and how it benefits the real estate industry as a whole.
Crowdfunding as an industry
Since crowdfunding only draws interested users into the realm of investors, the idea that it is being funded usually sees victory sooner rather than later, unlike when employing other methods. As an industry, it has been quite popular with consumer-driven companies offering specific products.
Everything you need to know about the crowdfunding model
Crowdfunding aims to provide an accessible platform on the web for investors to contribute to projects that interest them. For real estate, this model would be more or less the same, except that the assets seeking to raise funds would be a project or a land sale. Each investment made can be monitored or customized from the same platform so that it is easily accessible to all investors. The best part is that you don’t have to travel to other places to find a good asset to invest in, because everything is accessible with a few mouse clicks.
The benefits of crowdfunding
If you are a small-scale investor who is okay with risking large sums of money, crowdfunding in real estate could be a great option for you. The amount of capital that you will have to invest in a project is always limited, and this is profitable because it can be part of a big business. As more investors come together to invest in the same project, the project eventually gets off the ground with a combined effort.
Crowdfunding in Indian real estate
Because crowdfunding is such a simple concept that involves displaying all projects seeking funding on one website, the real estate industry could benefit greatly from it.
SEBI (Securities and Exchange Board of India), however, has proposed a new set of rules for crowdfunding through various web-based platforms. According to this, only those entities that are not linked to a business group with a turnover of Rs 25 crore or more could take the crowdfunding route. Additionally, any real estate entity that has been in existence for four years or more would not be able to explore this option.
Help stalled projects
Currently, the Indian real estate sector has been inundated with a large number of projects that are incomplete and frozen due to lack of funds. The lack of payment of debts has led banks to withdraw funds for these types of projects, and this is where crowdfunding could step in and help.
The crowdfunding market in India
The crowdfunding market in India has been the target of numerous fraudulent deals, seeking to hoard money for very different reasons than the project claims. Because the industry has no laws governing the functionality of the service, crowdfunding is a rather unorganized solution for investors willing to put their money on the line. The only way to save the industry would be to introduce some strict rules and have a strong mechanism, so that every transaction is well regulated.
