Simple Crowdfunding’s Atuksha Poonwassie talks to Marc Shoffman about funding property developments during a pandemic…
Atuksha Poonwassie co-founded Simple Crowdfunding in 2013, aiming to make property investment accessible to everyone while helping property developers address the housing shortage in the UK. The platform facilitates both equity and debt investments and its loanbook is now approaching £9m.
Although the coronavirus pandemic has slowed activity in the property market, Simple Crowdfunding has still managed to fund projects during lockdown. It has even used its network to help donate to charitable causes, all while coping with the regulatory changes and challenges which are emerging from the Financial Conduct Authority (FCA).
The property market is not moving as fast as some had hoped following the so-called Boris bounce after the General Election at the end of 2019. However, Poonwassie, who is also a director of the UK Crowdfunding Association, is confident that there are plenty of positives to build on.
Marc Shoffman: How have you addressed the challenges of funding projects during the lockdown?
Atuksha Poonwassie: We have had a lot more requests coming in for finance. There are challenges, as we see developers looking to raise between £10m and £12m but that is a bit too large for the retail-focused community we have. The market from an investor standpoint is still active but people are investing a bit less, which makes doing a larger fundraise a challenge. We are working with other types of investors such as high-net-worth individuals and institutions who may be able to provide funding.
Valuations are also proving a challenge. In a typical project you will go to the site for the valuation but current restrictions limit that. Our current projects had their most recent valuations conducted in February or March. However, values may have gone down since then and we are adjusting that internally to accommodate for it. All our P2P loans have been paid back.
On the equity side, we have some projects running late because sites have either shut down or been reduced, or because sites have completed but sales are delayed. One of our sites was two weeks away from completion but it was being run by two doctors who have now gone back to the front line to help with the coronavirus crisis.
MS: How has the pandemic affected Simple Crowdfunding?
AP: We have had a double hit. We had the election and the challenges facing the country at the end of last year and then the market started picking up. There were a number of projects in the pipeline in January and you could tell there was a lot of interest and then coronavirus hit.
The challenge we have is we don’t know how long this will go on for. We are in property and that is more volatile from a market standpoint. We did have plans to launch new products that we are still working on in the background but now is not the time to launch.
MS: Is there more that P2P lenders could be doing?
AP: It would be nice for more P2P lenders to be able to offer the government support schemes. Meanwhile, several lenders are putting efforts in elsewhere to help those in need. We are supporting a charity called Go Dharmic, providing food and personal protective equipment to those who need it.
MS: What is the current mood among investors?
AP: Investor inflows have slowed. For the first few weeks of the pandemic people were trying to find their feet and make sense of what was happening. Filling up an ISA was the last thing on many people’s mind. That gave us an opportunity to explore and get our head around what needs to happen. We have been reaching out to our communities and tapping into our contacts, providing logistical support and communication. The appetite has changed. There seems to be an increased appetite for P2P investments compared with equity, as you have fixed returns with a secured asset.
MS: How have you been coping with the new FCA P2P regulations?
AP: We welcomed the changes on appropriateness tests and marketing restrictions from last year. We are in a different position because we offered equity and P2P so had already taken the view that we would categorise all investors regardless of which type of investment they were making. It wasn’t a substantial change for us. Ultimately P2P lending is investing. Being able to provide investment opportunities to everybody in an environment they understand is a good thing to be doing.
MS: Is there anything the FCA could do better?
AP: Having sensible regulation is a good thing. The communications pushed out in terms of the risk profile of Innovative Finance ISAs haven’t been helpful. There have been conversations through my involvement with the UK Crowdfunding Association on this.
MS: What would a recovery look like?
AP: If we had an indication of when we could get out of this, then it becomes easier to plan. We don’t have that insight yet and there are lots of theories about what life will look like after lockdown. I know larger homebuilders are back on site as projects will continue.
Some of the sites we have are open and are maintaining social distancing. There will be shortages of certain stock though and we don’t know the impact of disruption to goods coming from overseas. There is a sale cycle that may be delayed.
People are looking at ways around this such as virtual reality tours or walk-throughs. Some valuers will go back on site. There also needs to be a discussion on the financial aspects, such as whether developments will need to be downvalued. There is work being done to prevent that happening. From an alternative lender standpoint, and especially P2P, it is an opportunity if other lenders become tighter in terms of criteria.