Real estate crowdfunding in Ireland is growing rapidly, with more than 5,000 developers and investors using the service to raise capital for projects ranging from new developments to affordable housing.
It’s no coincidence that it’s the Irish real estate sector that is booming, says Andrew O’Brien, managing director of The Irish Real Estate Association.
The Irish realestate market is set to triple by 2027, according to the Irish Real Property Association.
“Real estate crowdfunding has been around for a number of years now.
It’s definitely grown in the last year, and there are more and more people interested in this,” he said.
While crowdfunding has gained popularity in recent years, the process is far from foolproof.
Developers who want to raise money need to be certified by an industry regulator, and the company to which they are contributing needs to be approved by the Fianna Fáil-led Government.
“The process is a bit of a gamble,” Mr O’Brian said.
“You’ve got to be very careful about whether you have the right company and the right expertise.
It may not always be a good idea.”
There are some legitimate reasons why a developer may not have enough funding.
For one, crowdfunding can be a risky investment.
“It can be difficult to gauge what the market is going to do,” Mr Coyle said.
A developer may need to raise a large amount of capital in order to complete a project.
A project may also need to get the go-ahead from the Fíisir na nGaedhealg na Níg aireann (FENGN), the Government’s land registrar, before it can proceed.
A project that goes ahead may also have to pass the necessary regulatory checks, such as ensuring the land is available for development.
“There are other factors that are at play that might come into play if you’re building a house and you don’t have the appropriate regulatory approvals,” Mr Ní Gaedhealy said.
Investors also need more time to make a decision.
“You can’t have any of that until the end of the month,” Mr Síocháin said.
Some developers have invested a lot of time and money in developing their projects.
“Some developers do a lot to promote their projects through social media, so they get to see their projects on the market in real time,” Mr Loughlin said.
Others have not been as proactive.
“People may be afraid of raising funds,” Mr Murphy said.
“There’s not a lot you can do.”
The lack of regulatory scrutiny has made it difficult for investors to get involved in the crowdfunding process, and it’s not uncommon for a project to be funded by one developer alone, even if the developer has invested significant time and resources in it.
“If you’re investing in a development with no funding, it can be very difficult to know whether it’s a project that’s viable or not,” Mr Foyle said, adding that it can often be difficult for prospective investors to understand how to navigate the crowdfunding system.
“They may think they’re making an investment, but they may not know the right process or the right guidelines,” he added.
“That’s something that needs to change.”
In terms of crowdfunding, there are plenty of other potential benefits to the developer as well.
“A lot of developers will put money into the development and get the project approved through the Fáisirna Ní gaedheala nGedhealig na NGaedhales.”
These projects are much more affordable, and they provide a lot more employment for local people,” Mr Jolliffe said.
For example, Mr Coyne said, the construction of a new home is often seen as a big step forward for an area.”
Building a house is such a big commitment, and you’re looking to get that project approved in such a short period of time,” he explained.”
Once the home is built, you can go on to the next phase of the development, so it’s much easier to do.
The fact that developers can make such an investment without having to prove their involvement in the project is also good news for local communities. “
The developers who are interested in crowdfunding, they’re very keen to make sure that they’re investing with the right partners,” Mr McBride said.
The fact that developers can make such an investment without having to prove their involvement in the project is also good news for local communities.
“Real estate developers are looking at these projects as a way to get more people employed,” Mr Todt said.
It all comes down to a project’s potential for generating income, Mr Murphy agreed.
“One of the things that developers are keen on is to get people out of poverty.
If a project is going through the process and they’ve invested in the development with a large sum of money, they want to see that money go into their community.”