According to FutureBricks (previously named Real Funds) the future of Real Estate investment is not decided by large banks but by the investors. FutureBricks wants to create an environment where users may choose to invest according to their own values and budgets. FutureBricks wants to facilitate people who are willing to invest £10,000 to £20,000 in real estate developments. The FutureBricks site will act as a promoter to help marketing the projects connecting investors with property developers
FutureBricks was launched by Robin Karlsen and Arya Taware. They are both students at University College London (UCL) where they are studying Urban Planning & Real Estate. Arya recently reached out to Crowdfund Insider to share their story.
In commenting on why the pair decided to launch a real estate crowdfunding platform, Arya stated;
From our work experience with small property developers, we realized that many small and medium size property developers are unable to finance from banks for their development projects. In such cases, they have to source their funding through networking, which tends to be time consuming and often without any results. On the other hand, we also came across many people who wanted to invest in real estate but they were faced with two problems. Firstly, they did not have access to developers in need of funding, and even if they did manage to identify these, they did not have sufficient funds to invest in the developments. So, at this point, we noticed this gap in the market. We then decided to form an online platform where people can look through various projects to invest in with a minimal amount. We thought this will also increase the access to capital for small and medium size developers.
Arya continuesd with her belief there is exceptional opportunity today in the United Kingdom;
Real estate crowdfunding has not yet been fully established in the UK property market compared to the United States. In the USA, there are a few real estate crowdfunding platforms operating successfully such as Fundrise and Realty Mogul and more. They are successful despite having the restriction of accredited investors. By introducing a real estate crowdfunding platform in the UK, it will definitely have a positive effect on the market as many small and medium size property developers will get alternative source of capital to produce more housing and break the oligopolistic market of house builders in the UK. Small and medium-sized investors can now have the chance to invest in the development projects in their community and beyond. There are already few crowdfunding platforms for UK residential buy-to-let property but nothing yet to fund development projects like ours.
Recently regulations were announced that impact all aspects of the investment crowdfunding industry. When asked to comment on these new regulations Arya continued;
When the regulations get implemented, the need for loan-based crowdfunding platforms to be authorized by the FCA will unavoidably increase the barriers to the crowdfunding services and may result in a number of the existing operators not having the funds available to get FCA registered. The changes will, however, mean that the users are better protected from platforms that fail. The proposed rules that apply to investment-based platforms increase the regulatory burden on operators who will now be required to carry out more careful checks on those that invest through their platform. According to Jenifer Chappel from Bircham Dyson Bell: The FCA has attempted to strike a balance between recognising the important role that crowdfunding platforms play in providing funding for small and medium sized enterprises and the need to protect retail investors. The proposed rules place a significantly increased regulatory burden on some crowdfunding services and may have the effect of making investor-based platforms less user-friendly.
There are similar rules in USA, where only accredited investors can invest. However, the growth of crowdfunding has increased the pressure in USA to ease the regulations (JOBS ACT 2012). The JOBS Act has removed some company regulatory and disclosure requirements. It also lifted the ban on general solicitation and advertising in specific kinds of private placements of securities.
Therefore, if more real estate crowd-funding platforms emerge in the UK market, it will be interesting to see if these restrictions will be eased in the future like it happened in the USA.