Urbe.me launched a few days ago in Brazil as the first real estate equity crowdfunding portal in the country. After a long wait of months, while they built their presence both in traditional and social media, they finally launched their first project.
VN Cardoso de Melo, built by Vitacon, is a condo in a primo location in Sao Paulo city, Vila Olimpia. They launched the project to rise between R$ 1 million (about $250,000) and R$ 2.4 million (about $600,000), an estimated 8% of the condo value, according to Exame, a leading Brazilian business publication.
They estimated an aggressive return that could reach 40% to 60% in the end of the project (estimated at 60 months), a little above the local central bank interest rate of 14.25% per year. At first, CVM (the equivalent to SEC in the US) didn’t require the offer to be communicated, so long it stayed under the R$ 2.4 million required by Brazilian regulations (specifically under instruction 400/2003).
For while, the project managed to raise only R$ 58,000 (about $15,000) since launched on October 1st, even with press coverage. But there was a problem in the middle of the path: CVM didn’t require the offer to be registered at first, but after some days they required the project to be removed from the site, because of some advertising pieces. After a review, the campaign is back online and receiving funds.
Even considering this hiccup, the campaign is up and running for more than two weeks in total, so the results are somewhat disappointing. That’s because this may not be the best time to launch a real estate crowdfunding initiative in Brazil, as we mentioned earlier. Not only government bonds are paying high interests, there is also suspicion among Brazilians that the valuation is really that high. While Brazilian Real has lost a lot of value recently, a correction on the inflated real estate prices in local currency is still expected. Currently, most developers are offering discounts, but no decrease on nominal prices happened in large scale yet.
Whether or not that correction will happen, and how strong it will be, remains uncertain. While there was credit directed to real estate market, Brazil have a long history of high interest rates and, if they start to be reduced as many analysts expect, that can be a new boost to prices. That means the best time for real estate crowdfunding in Brazil may be months away yet.