As we have been indicating for a while, the default rates communicated by real estate crowdfunding platforms are far from reflecting reality in the sense that it generally takes many years before projects in difficulty end up being settled or liquidated. with losses for investors. To date, around ten projects have officially defaulted, which remains a drop in the bucket compared to around 3,000 collections financed since the beginnings of real estate crowdfunding around 8 years ago.
Big bankruptcy in sight!
On the ground, a dozen projects are currently accumulating delays of 3 years or more, often with legal proceedings initiated whose confidentiality does not help to know the reality of the financial situation. It is therefore to be expected that most of these projects will default with partial or total losses for investors. We can notably cite the promoter and developer L’Art de Construire, involved in 5 late projects from 2016 to 2018, and whose judgment of conversion into judicial liquidation was pronounced in October 2021 by the Lyon commercial court. According to our information, these 5 projects represent an amount of approximately 3.5 million euros invested by savers (excluding interest) that they will not see again even if some partial repayments have already taken place…
A default rate expected to rise between 1% and 2%
According to the data compiled by the HelloCrowdfunding site, we also see that around thirty projects are showing delays of at least 2 years with, as we will have understood, a real risk of loss as a result. It should also be noted that these delays predate the health crisis, the effect of which on reimbursements has not yet been measured. Posting a market default rate of 0.09% as we could read this week in the Fundimmo/HelloCrowdfunding barometer (widely taken up in the press) in any case makes little sense and refers to an image far removed from the reality.
Admittedly, the manager of the Fundimmo platform and president of the Financement Participatif France association, Jérémie Benmoussa, acknowledged during an online conference that ” the default rate will be mechanically expected to increase to a level estimated between 1% and 2% “. Savers should therefore forget this 0.09% and be aware that we are certainly already closer to 1%. Of course, this remains low and totally in line with the very high level of profitability served by real estate crowdfunding: around 9.2% in 2021 as in 2020. It should also be noted that some platforms are doing much better than others. others who accumulate more projects in difficulty.
Our article is therefore far from throwing stones at this investment, which we consider on the contrary essential for those who want to boost their savings, especially since it benefits from advantageous taxation (flat tax at 30%) compared to other real estate supports subject to the income tax scale. It only aims to focus on the lack of transparency and information on its level of risk, which is too often underestimated.
An overall lateness rate of around 11%
Overall, according to the Fundimmo/HelloCrowdfunding barometer, approximately 11% of ongoing projects are currently experiencing repayment delays. To get an idea, this represents approximately 160 delays out of 1,500 projects. A project is considered to be late when the maximum contractual repayment term has passed. This rate therefore does not take into account the minor delays which are frequent (weather conditions, work longer than expected, administrative contingencies, etc.) and comply with the regulatory extension period of 6 months. However, for most of these projects which are a few months late, there is nothing to be alarmed about and savers continue to receive their interest during this extension phase.
Real estate crowdfunding consists of lending funds over a short period (a little less than 2 years on average) to promoters, developers or property dealers (most often a contribution of equity in addition to a bank loan) through the intermediary of a specialized platform. The entry ticket is very accessible, from €1,000 or even less depending on the platform. Interest is collected at maturity, at the same time as the repayment of the capital.