Crowdfunding, in simple terms, is funding by the masses. This can be for done to finance a music tour, produce a feature length movie, or even purchase real estate. And as the concept gains stronghold across the world, the traditional way of raising capital for start-ups and new ventures will be shaken to the core.
You don’t need to oblige to a bank’s terms and conditions or get your loan rejected because your credit rating was low. You can interact directly with your investors (the “crowd”) and raise the necessary funds.
Property development is a capital-intensive business, and the average cost to start such a project run in several million dollars. And while a developer may have enough resources to buy land and initiate constructions, extra funds are required to complete the project. In such cases, bank loans seem to be the ideal choice.
But this common avenue of finance doesn’t come without its issues. Another way to go about getting finance or a construction project is to target wealthy investors. But that always runs the risk of putting millions of dollars in a single project, which makes most investors reluctant.
This is where real estate crowdfunding comes in. To start off, it also allows developers to raise the funds they need on an immediate basis to go ahead with projects. The community at large, which provided the funds, also benefits since crowdfunding can help developers build in areas where investors and banks are hesitant to put in their money. Another major benefit of real estate crowdfunding is that of transparency, since there are multiple investors who have their stakes in one project.
Since crowdfunding is mostly done through online platforms, the concept holds relevance across the globe. But there are two major factors that lead us to believe that crowdfunding has an enormous potential in Dubai and the rest of UAE:
Growth of SMEs
After the Arab Spring, small businesses have played a significant role in economic growth and job creation in the Middle East. Consider the following statistics:
Real Estate Investment Opportunities
While we will look at Dubai’s real estate outlook in a separate post, the property market in the Emirates is anything but positive, be it residential buildings, mega developments, urban sector development, and hotels. Plus, there are expectations for increased local spending.
The concept of crowdfunding is already being implemented in several industries of the UAE. Platforms like Eureeca and Alflamnah are helping investors from all walks of life to provide financial assistance to projects of their choice.
As more people from the Arab world overcome their inhibitions regarding crowdfunding, the easier you will find attracting willing investors for your next real estate project, which will further boost the property sector in Dubai. This is where Humming Realty comes in. It is the first crowdfunding company in Dubai that focuses solely on property investments, offering secure crowdfunding solutions for real estate investors.