The federal government appears a fan of online lending platforms. “Here in Germany, we need to learn to let delicate saplings grow,” the coalition government said to explain its relief for swarm financing – or crowd investing – in 2015. This is why financing with certain instruments via credit platforms is not subject to prospectus requirements. A prospectus is a formal legal document providing details about an investment offering.
But following an evaluation of the Small Investor Protection Act, the government apparently sees a need to correct these exceptions in the case of real estate financing.
“Given that sufficient alternative financing options are available for real estate projects, the federal government could consider excluding financing for real estate from the scope of the Capital Investment Act,” the government wrote in response to a request from the Green Party obtained by Handelsblatt.
The crowd investment market in Germany is still small, but it’s growing rapidly. According to the evaluation report, between 2011 and 2015 the market grew by 220 percent a year, reaching a total financing volume of €110 million, or $117.6 million. Other experts estimated an even higher figure. Two-thirds of this investment went to startups, and €36 million to real estate.
The federal government is critical of crowd financing’s growing importance for real estate. This is because facilitated financing could lead to overvaluation in real estate markets and trigger systemic financial crises, the government officials said in their evaluation.