Dubai: Funding options seem to be opening up for local developers outside of banks. Crowdfunding platforms could be on the verge of becoming a viable presence in Dubai’s online — and offline — spaces.
“There are many projects in the local market that are of a certain size, which banks may not be comfortable lending to, or if they do, it could be at a high interest rate,” Aakarshan Kathuria, Co-founder of EstateUp, which expects to go live with its first crowdfunding offering shortly, said. “Instead, owners of such projects could — if they want[ed] to — tap funds via smaller investors in lieu of a small equity stake in the project. And there are investors seeking alternative small-ticket investment options.”
For its launch offer, which went live on Wednesday, the EstateUp portal will present the credentials of a developer requiring funds of Dh8.7 million plus. This will used for a project in Dubai Residential Complex. If it raises this amount, the developer will be offering a maximum of 15 per cent share holding in the operating company. (Investors can come in at three levels, with the highest set at Dh55,000 and upwards, the middle one at Dh33,000, and the lowest at Dh14,000 plus).
“The developer will be allowed to list only after we have done extensive feasibility studies on the proposed project’s construction time frame, funding requirements,” said Kathuria. “These will be vetted through legal and audit teams.”
Once a proposal is seen as being eligible, it will listed on the EstateUp portal for 90 days. If, for some reason, the full listed amount is not raised, the funds collected will be returned to investors.
“Rera [Real Estate Regulatory Agency] can have an oversight role once a project reaches the pre-sales approval stage,” Kathuria. “But contributions from the investor shareholders will be kept in escrow and overseen by an independent fiduciary. And there’s always the land that will be maintained as collateral against any funds sourced.”
Once the projected funding is brought in, shareholders will have to wait a minimum of two years before they can recover it.
