Real estate crowdfunding promises to democratize property investment, offering retail investors access to asset classes traditionally reserved for institutional players. However, recent developments in Germany and France reveal growing cracks in this foundation at least in these two markets. Over the past two years, mounting project failures, market instability, and limited regulatory enforcement have exposed systemic risks. While some challenges stem from macroeconomic pressures, others reflect deeper issues of governance, transparency, and platform accountability.
Real estate crowdfunding setbacks must be understood within the wider context of macroeconomic and sectoral strain, of course. Yet, both Germany and France reveal common systemic vulnerabilities within their real estate crowdfunding markets:
- Leverage, Low Equity: Projects often rely on substantial debt relative to equity, exposing investors to greater downside risk.
- Illiquidity: A lack of secondary markets leaves investors locked into multi-year commitments without viable exit strategies.
- Transparency: Inadequate or delayed disclosures hinder informed decision-making and trust.
- Misalignment: Revenue models tied to capital raised may incentivize growth over diligence or quality control.
Does Confidence in Platforms Erode?
In Germany, retail investor confidence is under pressure. Legal action against crowdfunding platforms is increasing, as investors confront losses from failed or underperforming real estate projects. Independent market evaluators such as Investmentcheck have been vocal in their criticism—especially concerning the role of unregulated actors in the so-called grey capital market. These operate outside BaFin’s oversight, often using instruments like qualifizierte Nachrangdarlehen—a high-risk form of subordinated loan marketed as “crowdinvesting” or “mezzanine,” with limited protection for retail investors. This practice, along with the use of tied agents under Germany’s MiFID implementation, is widespread in the German market—also among German banks engaging in crowdfunding—effectively circumventing EU law and undermining efforts to protect retail investors.
One portfolio under scrutiny is Exporo, now licensed under the European Crowdfunding Service Providers Regulation (ECSPR). According to Investmentcheck, a 38 projects strong built asset porftolio they reviewed failed to deliver the promised returns. They claim a standout case, “Apartments am Markt” in Hamburg, was expected to yield 6.4% annually but ended with an 11.1% loss – this investment is now rumoured to be in the process of being exited at a nearly 50% discount compared to the origional valuation. Critics cite inflated valuations, over-optimistic marketing, and poor project transparency. It is difficult to judge if the criticism is always fair or the result of the platform’s leading position in the market. It could be a mix of both. However, Exporo is also named in a recently launched class action lawsuit in relation to a high-profile real estate development which has failed to materialise. Here the court is expected to move quickly to allow the class action to move forward, according to reporting by local daily Hamburger Abendblatt. This also related to pre-ECSPR activity and concerns the Germany specific qualifizierte Nachrangdarlehen. As a market leader, Exporo will likely draw more attention, other actors in the market also had their fair share of problems with the German specific financial structure.
The issues in the real estate market go beyond crowdfunding, of course. The broader German real estate market is showing signs of stress:
- Open-ended funds like hausInvest (Commerz Real) and Deka Immobilien Europa saw outflows exceeding €1 billion in 2023.
- Widespread valuation write-downs—especially in the office and retail segments—have triggered redemption restrictions and halted new acquisitions.
- Major asset managers like Union Investment admit they are struggling to revalue portfolios amid rising uncertainty.
Delays, Defaults, and Disruption
France’s real estate crowdfunding sector is facing also headwinds. According to the Autorité des marchés financiers (AMF), France’s Financial Markets Authority, approximately 30% of active projects were delayed by early 2024, with some entering insolvency. For projects launched in 2020 and 2021, delays stood at 20.1% and 36.9%, respectively, after two years. Some platforms saw up to 50% of projects repayments delayed. Public messaging often underplayed these risks. As the AMF noted:
“Actual returns on projects vary between platforms and can differ significantly from the contractual returns quoted to customers. Delays are very frequent, creating liquidity risks and may be a sign of financial deterioration. Between 8% and 9.4% of projects financed from 2019–2021 are now involved in insolvency or legal proceedings.”
More general market trends are also mirrored by the sectors own research. According to the Crowdfunding Barometer 2024 (Forvis Mazars and France FinTech), total crowdfunding volumes fell by 17% in year on year by 2024. The real estate segment declined by around 26% in the same period. Leading platforms, such as Homunity and Anaxago have reported default rates as high as 20–30% in certain project categories.
General market indicators reinforce the downturn:
- Commercial property transactions fell by over 50% in 2023 compared to the previous year.
- Sociétés Civiles de Placement Immobilier (SCPI) — popular retail real estate investment products — have faced valuation adjustments and growing redemption requests.
- Office and hotel projects, especially in the Paris region, are struggling amid demand shifts and tighter credit conditions.
Silence Amid Crisis
In Germany, Bundesverband Crowdfunding—now rebranded as Digital Invest Germany—has reduced public activity. Tensions between ECSPR-compliant platforms and unregulated legacy actors have weakened its ability to represent the sector effectively. The association has long tried to balance the conflicting member interests between professional ECSPR licensed platforms and grey capital market actors with limited success.
In France, the once-vocal Financement Participatif France (FPF) was merged into France FinTech in 2024. Since then, no clear mandate or sector-specific reforms have emerged publicly. This has further diluted focus on crowdfunding-related risks. Especially the steep fall in real estate investments, likely linked to the meagre performance highlighted by AMF, would have provided a relevant springboard for actions in order to reensure retail investors.
Many industry actors simultaneously operate platforms and direct opinion and action within national self-regulatory bodies, exerting undue influence over important decisions with regard to critical cutomer protection aspects. This dual role raises concerns about independence and accountability—especially during crises. There is no sector specific communication addressing the concerns of retail investors from the sector on national level.
Case in Focus: Limits of Voluntary Regulation
The case of Exporo illustrates the pitfalls of fragmented regulatory frameworks. While their legal problems and non-performing portfolio dates to pre-ECSPR times, Founder Simon Brunke, stated in an interview with Cash magazine in Germany: “The ECSPR license is not mandatory to operate a crowdfunding platform in Germany.”
This optionality created by the German Government and BaFin, the national competent authority, has allowed platforms to continue under less stringent regimes, avoiding transparency and consumer protection obligations. As Brunke warned: “The risks of inadequate regulation clearly outweigh the benefits. Without mandatory ECSPR licensing, platforms are not subject to uniform standards—which exposes investors to potential harm.”
He added: “Unlicensed providers sidestep regulation, while licensed platforms shoulder heavier compliance burdens. This creates an uneven playing field. A market shakeout may come, but the current situation is self-inflicted and unsustainable.”
Brunke’s remarks—given Exporo’s own skeletons in the closet and their involvement in the Bundesverband Crowdfunding/Digital Invest Germany—underscore a growing rift in the German market between regulated and unregulated players. Whether his calls for reform will gain traction in the sector remains to be seen.
ECSPR: A Floor, Not a Ceiling
The European Crowdfunding Service Providers Regulation (ECSPR) provides a common legal framework across the EU, offering minimum standards for transparency and investor protection. But enforcement varies widely by country—and in Germany, its optional nature has undermined its impact.
To truly protect investors and stabilize the market, ECSPR must be seen as a floor, not a ceiling. We already have additional requirements for crowdfunding service providers the within Digital Operational Resilience Act (DORA) and within days from the European Accessibility Act (EAA). Additional improvements either from within the sector or from competent authorities are essential, but in particular on national level aspects of consumer protection must be addressed:
- Mandatory Stress Testing: Platforms should evaluate and disclose project performance under adverse conditions.
- Standardized Risk Ratings: Clear, comparable risk scores would help investors assess project viability.
- Periodic Reporting Requirements: Regular updates should disclose financial performance, delays, and any restructurings.
- Investor Education: Platforms and national associations should provide accessible guidance on diversification, risk, and due diligence.
Inflection Point?
The experiences in Germany and France should serve as a wake-up call – they are not the end. Without bold changes in behaviour, real estate crowdfunding risks becoming a cautionary tale of misused retail trust at least in these two markets – yet it may spread beyond geography or industry focus a number of platforms operate not exclusively in real estate. The legal ambiguity of applied crowdfunding in Germany may be an outlier, the reported shortcoming in delivering promised returns is not. Policymakers, platforms, and industry bodies must act to restore transparency, enforce accountability, and deliver on the sector’s original promise: opening up high-quality investment opportunities for all.
