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Crowdlending Real Estate Luxembourg

What is crowdlending?

Crowdlending is one form of participatory financing (also known as crowdfunding). Crowdlending consists of collecting "interest-bearing loans for businesses, to finance their development or carry out specific operations".

Like crowdfunding, crowdlending is a business financing mechanism that allows citizen savings to be mobilised.

In practice, crowdlending enables investors to make a financial investment in the form of a loan to a company.

In the real estate sector, crowdlending makes it possible to finance real estate promotion activities or the development of real estate projects by making a public appeal to savings via a crowdlending platform, and not just to banks.

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Who is property crowdlending for?

All players in the real estate sector can use real estate crowdlending. The size, financing structure and risks of the project are important criteria. In general, it will be easier to finance a project via a crowdfunding platform if it is combined with a bank loan (or a firm commitment from the bank).

As far as investors are concerned, property crowdlending is a form of investment open to the widest possible range of people. Depending on the type of project and the platform you choose, you can invest in property via a crowdfunding campaign from as little as a few hundred euros.

The advantage is that individuals do not need to be investment professionals to invest and benefit from a good return.

What types of property projects can be financed using equity crowdfunding?

Equity crowdfunding is best suited to short-cycle property projects (2 to 5 years), which are most often undertaken by SMEs.

For example, crowdlending can be used to : 

  • Financing a property development ;

  • Financing the purchase of a property with a view to resale;

  • Financing a property holding company to carry out several property transactions;

  • Refinancing a company in the property sector;
  • Financing a retail or office property project; 

  • To finance a hotel business, a coliving project or a mixed project (combining residential property with other uses such as offices).

To check whether your property project can be financed using crowdlending, be sure to check the funding conditions of the participatory finance platforms you are considering using. Some people use a participatory investment adviser to guide them in their choice of platform.

What are the advantages of real estate crowdlending for real estate players?

For investors who lend their money to a company, the advantages of crowdlending are many:

  • Higher potential yield : The interest rates offered on the platforms are generally higher than those on savings books;

  • The satisfaction of supporting businesses, the real economy, employment and value creation.

  • Simple operations Once an investor's account has been opened on any platform, the investment is made in just a few clicks.

For property professionals, crowdlending offers a number of advantages:

  • A additional source of financing other methods of property financing or loans, such as bank loans, "family & friends" financing and institutional financing;

  • A leverage on shareholders' equity (on the BeeBondsYou can raise funds in the form of a loan up to 75% of the equity capital required by the bank; 

  • A way of obtaining funding quickly (depending on the project and the platform chosen);

  • The benefit of a visibility for the company and its project as part of the fundraising campaign ; 

  • A direct link with investors.

Crowdfunding property projects: returns and interest rates for investors

The returns offered to investors vary depending on the platform, the type of property project and the risks involved.

On the platform BeeBondsThe average gross interest rate on property investments is around 7.7%, with a net rate of return of around 5.4% (after withholding tax).

From one equity crowdfunding platform to another, investors may or may not have to pay certain fees. But these fees are well below the management fees for a securities account.

Property crowdfunding: what are the conditions?

For investors, it is essential to have a valid investor account on a crowdlending platform.

But you need to be sure that the equity crowdfunding platform in question has been approved by the French financial markets authority (AMF). Take BeeBonds, for example. You will find even more details in the BeeBonds general terms and conditions.

For project sponsors, the first condition is to have a property project with proven sales or rental potential. At BeeBonds, the company must also have a fairly consistent track record and a bank loan for completion. BeeBonds is involved in financing 75% of equity.

What are the risks associated with crowdlending?

There's a saying that goes "There is no free lunch" when it comes to investment, and the risk/return trade-off needs to be taken into account even when it comes to real estate crowdlending.

Like any investment, crowdlending involves risks for investors. In particular, lending to businesses involves the risk of total or partial loss of the amount invested. </Each crowdlending application carries its own level of risk.

To assess the risk, you are invited to consult the information memoranda and descriptive notes relating to the property projects in which you are considering investing. You can also consult a participative investment adviser to help you make your decision.

Property financing: how long does a property crowdlending campaign last?

While some platforms take between 7 and 14 days to finance property projects, others manage to raise €1 million in just a few minutes. At BeeBonds, this time is between 40 seconds and 5 minutes when the amount to be financed is between €500,000 and €1 million. Once again, the attractiveness of the project is key.

Real estate crowdfunding in Luxembourg: examples of campaigns

The Callista financed by BeeBonds in 2022 has been a great success. This project offers an interest rate of 9.00% gross per annum for a maturity of 3 years and is the latest in a series of projects financed in Luxembourg.

The Wekare is the first in the series to be repaid after three years of maturity.

The Lola to finance the construction of a crèche and two two-family homes in Luxembourg, was successfully financed in September 2022. 

The ArchThe project, aimed at financing the construction of a coliving space in Luxembourg to meet the expectations of the new generation of residents in terms of societal and environmental challenges, was successfully financed in February 2023.

Real estate crowdfunding luxembourg
Real estate crowdfunding luxembourg
Real estate crowdfunding luxembourg
Real estate crowdfunding luxembourg

The growing popularity of crowdlending in Luxembourg, Belgium and elsewhere

In Belgium, participative investment and crowdlending are taking root. FSMA studies confirm an increase in the amounts financed via crowdfunding, firstly between 2014 and 2017, and then from 2018 to 2020.

The attractiveness of crowdlending in general, and real estate crowdlending in particular, continues to grow, especially with the new EU regulation due to come into force in November, which aims to strengthen the legal framework for the sector.

SME property developers who have not yet made use of this financing alternative will soon follow suit.

Individuals who have savings and want to make them grow will find this simplified method of financing an excellent product.