Property development is a capital-intensive venture that requires funding, from the time an idea goes on the drawing board until turnover. Because of this, investments are sourced from a host of interested and financially capable parties.
The pooling process is known as syndication, in which participants or investors infuse their money toward a two-pronged goal: to contribute to the success of a property developer’s initiative and, correspondingly, to be rewarded with financial returns for banking on the project.
In the conventional way of real estate syndication, transactions between the property developers and the investors often involve large chunks of money. These are characterized by meetings in brick-and-mortar settings, which exude an aura of big-business formality, and are consummated in the presence of both parties’ lawyers, advisers, and/or representatives. Signatures are affixed on piles of dead-tree legal documents.
Owing to several innovations, and with the help of technology, syndication has become more flexible and less cumbersome in the form of crowdfunding.
Traditional versus revolutionary
Real estate crowdfunding is essentially the digital form of syndication that goes on a wider scale, and which is capable of forming a broader reach. Through Websites, investments are sourced and infused from anywhere there is Internet connectivity.
Accredited investors (ie, investors whose financial position has been checked) can participate in the pooling of financial resources by turning to their gadgets, including mobile devices like tablets and smartphones, and logging on to their online-platform accounts. Using secure virtual-payment gateways, they can instantly back their preferred projects, or withdraw available earnings on their placements.
But more than the digital ease, the new-day syndication benefits more users because it demolishes the status quo. Where in the traditional model, only big-time individuals and organizations can participate, the revolutionary method allows regular people to retail-invest and claim ownership in ambitious property-development ventures. This is because of the lower minimums in placement amounts.
Using the HBR portal, investors can participate in developing prime real estate in the vibrant emirates of Abu Dhabi and Dubai for as low as AED1,000.