The crowdfunding sector, which gained rapid growth momentum worldwide during the COVID-19 pandemic, has not only opened up new opportunities for the public to invest their free capital but also boosted the expansion of small and medium-sized businesses. Over the past decade, this growing fintech segment, serving as an alternative to traditional banks, has had a significant impact on the real estate market.
In 2021, the global real estate crowdfunding market was valued at $10.78 billion (Polaris 2022). By 2023, it had grown fivefold. Experts predict that this market, often still considered niche, will grow more than sixfold over the next eight years. According to Finresearch, by 2032, the global real estate crowdfunding market will be worth $349.26 billion.
Crowdfunding Filled a Market Gap
Crowdfunding has made a significant contribution to the development of the Baltic real estate market over the past decade. Last year, in Lithuania alone, over €203 million in loans were raised (an increase of €69 million compared to the previous year and double the amount in 2021) for 2,788 real estate projects.
One of the first crowdfunding platforms in the Baltics was established shortly after the 2008 real estate crisis when many projects stalled due to a lack of financing options. Platforms like Estateguru became a solution, enabling the financing of projects that might otherwise have never started or been completed.
Crowdfunding not only filled gaps in the market but also provided new momentum for the growth of the real estate sector.
“In recent years, the rapid growth of the crowdfunding market has been driven by technological advancements, increased investor interest in real estate, and the demand for alternative financing sources. This market provides real estate developers with the opportunity to secure funding for their projects, as banks with conservative policies tend to lend only to larger businesses with AAA ratings. For small and medium-sized businesses, securing initial capital has long been one of the main challenges, stalling the development of smaller real estate projects across the Baltic region,” notes Mikhel Stamm, CEO of Estateguru.
What is the Growth Potential of the Baltic Crowdfunding Market?
According to Statista, the value of loan transactions in the Baltic real estate crowdfunding market is expected to reach approximately $0.99 billion by 2024. This market is projected to grow by about 2.20% annually, reaching $1.08 billion by 2028.
According to Mr. Stamm, Estateguru investors in the Baltic countries have financed 2,485 real estate projects over the past decade—530 in Lithuania, 1,487 in Estonia, and 468 in Latvia—with a total of €645 million raised for these projects.
“Crowdfunding attracts investor funds from across Europe, enabling retail investors to earn returns that were previously only accessible to major banks,” says Stamm.
Over its 10 years of operation, Estateguru investors have raised more than €850 million for real estate development projects across Europe and earned over €85 million in interest.
“Hundreds of funded projects have translated into thousands of square meters of living space—new townhouses, apartments, and other residential units eagerly awaited in the major cities of the Baltic region. During this period, most loans were raised for projects in Estonia (€367 million), followed by Lithuania (€160 million) and Latvia (€117 million). Our experience shows that developers, most of whom focus on small and medium-sized real estate projects, borrow an average of €150,000 to €1 million in the Baltic countries,” adds Stamm.
Stricter Lending Practices
Crowdfunding provides small and medium-sized businesses with the opportunity to borrow between €10,000 and €3 million for real estate projects, working capital, or bridge loans. This sector offers more flexible terms than traditional banks, where decisions on loan approvals can take months.
“The crowdfunding market assumes higher risks, but that doesn’t mean it is not carefully assessed. Our top priority is to ensure that investors receive their returns on time. Since 2023, we have adopted stricter credit policies as part of our new lending practices. We review each borrower’s financial statements, credit ratings, shareholder information, asset valuation reports, business plans, and past projects,” notes Stamm.
While small businesses are the primary clients of crowdfunding platforms, larger, well-known real estate developers in the Baltics also take advantage of the sector’s lower bureaucracy, speed, and flexibility.
“In Estonia, we have been collaborating for years with Endover, one of the country’s largest real estate developers. In recent years, our platform’s investors have raised over €8 million for their projects, such as Volta Quarter and Rocca Towers,” says Stamm.
He adds that in the Baltics, as in the rest of Europe, crowdfunding in recent years has given the greatest boost to the residential real estate market.
“The highest demand in our region is for apartments and townhouses, especially in cities where populations continue to grow. Residential real estate projects account for approximately 56% of all loans raised on our platform in Lithuania, Latvia, and Estonia. Such projects will remain the primary asset class of interest to investors in the future, offering stable returns and allowing them to diversify their portfolios through real estate investments that were previously inaccessible,” Stamm concludes.
