Will your real estate crowdfunding platform be in business next week?

Crowdfunding platform

With less than a week before the final deadline, just about 10% of the 180+ real estate crowdfunding platforms operating in the European Union have received the mandatory authorisation required to continue the provision of their crowdfunding services.

The Regulation on European Crowdfunding Service Providers (ECSP) (EU 2020/1503), laying down uniform rules across the EU for providing investment-based and lending-based crowdfunding services, came into force on November 10, 2021.  In order to accommodate a smooth transition into the new regime and ensure continuity of services, all operational crowdfunding platforms were provided with a 2-year transitional period, allowing them to obtain the necessary authorization.

Unauthorized platforms cannot provide crowdfunding services and onboard new investors from November 11, 2023.

As of November 6, 2023, the European Securities and Market Authority has registered a total of 73 crowdfunding authorizations, with 20 of them being granted to real estate crowdfunding platforms. Please see the table at the end of the post for a full list of authorized European real estate crowdfunding platforms.

Key provisions of the ECSP Regulation

The ECSP regulation introduces a number of new requirements for real estate crowdfunding platforms, including:

  • Authorization: Platforms must obtain authorization from a national regulator before offering crowdfunding services.
  • Governance: Platforms must have a sound corporate governance structure and appropriate risk management procedures in place.
  • Investor protection: Platforms must provide investors with clear and transparent information about the risks involved in crowdfunding.
  • Transparency: Platforms must disclose all material information about crowdfunding projects, including the platform’s fees and conflicts of interest.

Regulation’s impact on the European real estate crowdfunding industry

The ESCP regulation aims to harmonize crowdfunding regulations across the EU and provide greater protection for investors.

The regulation will have a significant impact on the crowdfunding industry, as it will raise the bar for entry and make it more difficult for new platforms to compete. This could lead to consolidation in the industry, as smaller platforms may struggle to meet the new requirements.

Positive Impacts

  • Increased investor protection: The regulation has increased investor protection by requiring platforms to provide clear and transparent information about the risks involved in crowdfunding.
  • Harmonization of regulations: The regulation has harmonized crowdfunding regulations across the EU, making it easier for platforms to operate in multiple countries.
  • Increased investor confidence: The regulation has increased investor confidence in crowdfunding by providing a framework for platforms to operate in a responsible and transparent manner.

Negative Impacts

  • Increased compliance costs: The regulation has increased compliance costs for platforms, which may have led to some platforms exiting the market.
  • Increased barriers to entry: The regulation has made it more difficult for new platforms to enter the market, as they must now meet stringent authorization requirements.
  • Reduced competition: The regulation has led to a reduction in competition in the industry, as some platforms have been unable to meet the new requirements.

Overall, the ECSP regulation is expected to have a positive impact on the real estate crowdfunding industry in the long run. By increasing investor protection and harmonizing regulations, the regulation is likely to attract more investors to crowdfunding and encourage more platforms to enter the market. However, in the short term, the regulation is likely to have a negative impact on the industry, as some platforms will be unable to meet the new requirements.

Additional impacts

  • The regulation is likely to lead to a consolidation of the industry, as smaller platforms are acquired by larger, more established platforms.
  • The regulation is likely to lead to a shift towards more institutional investors, as retail investors may be deterred by the increased complexity of the regulatory environment.

List of authorized European real estate crowdfunding platforms

Real estate crowdfunding platformCrowdfunding typeWebsiteHeadquartersLicensed for
UrbanitaeDebtEquityhttps://urbanitae.com/SpainBelgium, Germany, Denmark, Greece, Spain, Finland, France, Hungary, Ireland, Italy, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Sweden 
CrowdestateDebtEquityhttps://crowdestate.eu/EstoniaAll EU countries
EstateguruDebthttps://www.tokimo.eu/EstoniaAll EU countries
RaizersDebtEquityhttps://estateguru.co/FranceBelgium, Spain, France, Italy, Luxembourg, Netherlands, Portugal
8 StarsDebthttps://letsinvest.eu/LithuaniaLithuania
ZinbausteinDebtEquityhttps://www.zinsbaustein.de/GermanyAustria, Belgium, Germany, Luxembourg
La Premiere BriqueDebthttps://www.lapremierebrique.fr/FranceNone

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