When can P2P Crowd Funding really benefit the people? Part 1.
When builders build, their main problem is selling it and maintaining their cash flow. Now, people cannot afford to buy because the salary cannot allow the banks to loan out the amount to buy the properties. There are two ways to go about this on the buyer side. On the seller sider I will discuss in the future.
- Increase productivity and the salary.
- Make easier loans – banks taking higher risk.
Increasing the salary is a cost problem as employers cannot afford to do so now. Producing goods at higher cost means more expensive goods. They cannot sell this finished products in the competitive global market.
Making easier loans is another way out. The banks do NOT want to take higher risks. So, P2P Crowd Funding comes into existence. These funds are from general public who instead of buying into mutual funds buy into these Crowd Funds. These pools of money will be used to pay the 80% of the price of the property.
The onus of the crowd funding company is to produce results – in the form of return on investment to investors. You buy into this fund, you look for returns. The crowd funders will have to channel returns by charging a premium onto the 80% of the price of the house. How can this be achieved?
Tomorrow we discuss about this.