Crowdstacker is set to launch property development loans (PDLs).
The projects will be offered as mezzanine loans, bridging the gap between money offered by the bank and the full cost.
PDLs will be secured against the value of the project as a second charge behind the senior lender.
Crowdstacker has previously offered P2P loans and crowdbonds for a range of businesses such as nightclubs, vehicle leasing and agricultural financiers, as well as firms providing development finance including Clearwell Capital.
This will be the first time that investors can fund PDLs directly through the platform.
“We see PDLs as something akin to ‘property development lite,’” Karteek Patel (pictured), chief executive of Crowdstacker, said.
“The basic principle is to provide all the excitement and interest from featuring specific build projects where the investor can see the site, the architect plans, the interior fit-out plans, and the vision of the end-product. Plus they can follow the development as it progresses towards completion.”
The loans will be eligible for Crowdstacker’s Innovative Finance ISA.
However, the platform warned that investors should be aware of the risks.
“There are certainly some clear advantages to investors including confidence in the robustness of the project which will have been thoroughly assessed by the senior lender even before going through the due diligence processes of the mezzanine lender,” Crowdstacker said.
“Disadvantages include that, as a second charge loan, the mezzanine lenders are only repaid once the senior lender has been repaid.
“To help mitigate this PDLs will only top up development finance to a total of 75 per cent loan to gross development value, meaning that the final expected sale value achieved can fall by up to 25 per cent of its predicted value before it affects the ability of the developer to repay the debt in full.”