In real estate, loan investments pertain to debt-financed initiatives.
Developers or property managers raise capital by borrowing money from individuals or companies, with the promise of interest on the prinicipal amount. To pay the interest at the agreed time, these borrowers will have to sell or lease the property, and then profit from the transaction. Part of the profit should cover the prinicipal and interest that would be paid back to the investors.
Unlike equity investments, loan investments do not entitle investors to be part-owners of the properties. Developers retain the ownership claim, and all entitlements associated with the claim, unless they fail to return the principal and interest to the investors. In this case, they will have to submit themselves to a class suit or a similar legal action that investors may take.
In real estate crowdfunding, loan investments are also provided as funding opportunities to the “crowd”. There are project operators that want to limit the investors’ claims to the property, and are comfortable with the debt-financing structure to undertake their funding campaigns with success.
The HBR portfolio welcomes loan-investment opportunities, including projects under the build-operate-transfer (or BOT) arrangement with the UAE government. This is as long as project operators pass all thorough due-diligence checks and successfully complete the entire vetting process. In view of the HBR portal’s commitment to transparency, information on the opportunities are made available to potential investors.