The Application Of Crowd-Funding Model In China’s Real Estate Industry

The real estate industry, in its nature, is a typical capital-intensive industry, requiring large investment in earlier stages with long investment period.After decades of explosive development, the real estate industry has undoubtedly become the one of the pillars in China’s economy. However, as this industry China`s real estate market is now overheated, the government has continually introduced several policies to stabilize housing price and curb speculative purchase. These policies directly limit the source of capital, causing the problem of short-term illiquidity of the real estate companies.In fact, the real estate companies already experience a lot of financing difficulties such as single financing channel( solely depending on bank)、being hard to listing or even back door listing, and other highly risky financing solutions.In such circumstances, these companies are in urgent need to have a new financing model to ease the current problems. Meanwhile, as the internet financing gains increasingly attention, the crowd-funding emerges as the times demand. And now this new financing model becomes popular in China and is gradually adopted in the real estate industry.Considering that innovation in the real estate financing is nothing short of difficulty and the crowd-funding is a relatively new concept in China, there are merely limited researches about the application of such model in the financing of real estate field. Hence, in this paper, approaches of comparison, case studies, etc., are adopted in order to provide a research in this regard.Firstly, in this paper, the research background, purpose and approaches will be introduced according to the current application of financing models and the development of the crowd-funding. Based on the view that the financing model of real estate industry is lack of variety, this paper compares the advantages and disadvantages of traditional financing models commonly appeared in this industry. Regarding to the development of the crowd-funding model, its concept, characteristics and how it can be applied in the financing of real estate companies, the paper uses the LYT project of Chongqing GW real estate company as a case to discuss the subject, process, outcomes,and interest distribution etc., of the crowd-funding model. The paper also introduces the construct and application method of this new model. Moreover, the paper discusses the potential risks in the crowd-funding and provides possible solutions accordingly. The conclusion, as follows:(1)The financing solution of the real estate companies is monotonous(solely relying on banks to gain credit), requiring comparatively high cost. Hence, this model is greatly influenced by macro policies and these companies are in dire need of a new financing model.(2)The advantages of crowd-funding, such as low cost, low risk and short time span of getting financed can effectively relieve the financing pressure faced by many real estate companies.(3)Companies face potential risks(the legal risk, deal organizing risks, etc.) when adopting the crowd-funding. Therefore, companies need to construct a strict risk-controlling system to ensure the sound application of this model.