Two critical trends in the UK economy converge in the firm we’re examining today: Sharia finance and crowdfunding. Exponential Investor has covered crowdfunding before – but not Sharia.

A rapidly growing population of UK Muslims want to buy goods and services from the companies you’ve invested in. These purchases must fit in with the pervasive influence that religion has on many of their lives. In particular, the dominance of the UK’s strict Deobandi and Wahabi Islamic sects means that we all need to plan for the rise of the Islamic system of Sharia law, as the Muslim population grows.

Sharia is therefore going to play an ever-increasing role in our lives – and smarter investors are already preparing for this fact.

Today, we’re interviewing Javed Khan. He’ll be explaining exactly why his firm is well placed to benefit from the inevitable demographic ascendancy of Islam.

Of course, PropTech Crowd is also riding the all-important crowdfunding wave – and that gives Javed an additional insight into Britain’s radical economic changes.

AL: What is PropTech Crowd? 

JK: PropTech Crowd is an equity-based property crowdfunding platform, based in London. Property crowdfunding is a relatively new way of investing, allowing multiple investors to come together to invest in individual properties. As each investor has a small share, the cost of entry is significantly lower than it would be if they decided to invest alone. The end-to-end experience for the investor is totally online. We are leading players in the digital transformation of the property industry.

AL: What is your background?

JK: I have been in the property business for 25 years. As a young entrepreneur I set up a residential lettings agency in Central London, when there were only a few lettings agents. At that time, estate agents were busy selling properties; they either did not know how the lettings business worked; or couldn’t be bothered, because they were making too much money in sales.

I progressed from letting and managing properties for clients, to buying my own properties – for renting, or to refurbish and sell on. I also worked with my own network of private investors, on a joint-venture basis.

Over the years I have built up good relations with property professionals: builders, surveyors, architects, solicitors, and estate agents. I am very fortunate in being able to source below-market-value deals easily.

I often see the potential in a property that others may miss. It might be run-down, smelly, dilapidated and dirty – but if it’s got potential, and the price is right, I’ll take it on. I have created some amazing living spaces over the years.

I always believe that it’s not how much you spend on renovating; it’s how you spend it. Working within a budget is crucial. You should economise where you can, but use quality where necessary. After all, the property will be someone’s home, at some point in the future.

AL: How exactly does PropTech Crowd work?

JK: We have a team of experts with a combined experience of over 70 years in property, finance and ethical investments. Through our network, we source properties that we are confident would make ideal investments. Then, an SPV (special purpose vehicle) is set up. This is a limited company registered in Companies House, which will own the specific property.

Once registered, our investors can browse through all the properties we have available for funding. PropTech Crowd has an exclusive option to purchase while the property is being crowdfunded.

Available properties will be shown on our platform as investment opportunities. Each share costs £500. Investors will link their bank or card details with their online e-wallet, where they will transfer the money they wish to invest. Each property has all the relevant financial information to enable investors to make an informed choice. It is always recommended to invest in a range of properties, in order to diversify the portfolio and reduce risk.

PropTech Crowd takes care of all the administration work. Investors simply buy shares in the SPV, therefore they are buying a share in the underlying asset. We don’t touch their cash – it’s all processed by a third-party service, called MangoPay. Investors can track their investments through their online dashboard.

If the property is a buy-to-let, investors will receive a proportion of the rent, according to the number of shares they own. This will be paid as dividends. At the end of the term, (generally 3-5 years) the property is sold and the net profit is distributed among the investors, proportional to their shareholding.

After the property is sold, the SPV is wound up – never to be used again. Each property has a separate SPV that owns it.

AL: How are the transactions actually performed?

JK: When a property gets 100% funded, all the funds get transferred from MangoPay to the lawyer acting for the SPV, ready to purchase the property. The process is completely transparent: investors can check with Companies House to confirm their name and shareholding in the SPV; they can check the ownership of the property with Land Registry.

AL: Who are your competitors, and what makes PropTech Crowd different?

JK: Property crowdfunding started around 2012. The biggest players in the UK, Property Partner and The House Crowd, have raised £50-60 million each. In the US, Crowd Street has raised $3 billion since 2012.

AL: How are you different?

JK: None of the platforms mentioned above are Sharia-compliant. However there is a growing trend with increasing demand for Sharia-compliant solutions – so don’t be surprised if other platforms begin to emerge within this space.

Our model is to offer investors a totally new option – no mortgages or loans are used. The total cost to purchase each property is raised from the crowd. So it’s a cash purchase. This means our model is Sharia-compliant – and therefore we are an attractive alternative for Muslim investors.

However, anyone can invest regardless of their faith or religious beliefs. One major benefit is that if a property is vacant, there are no mortgage or loan payments that would threaten the project’s ability to continue.

AL: Do you think there is a demand for this type of product?

JK: Absolutely. Our target market is 20-45 year olds who have savings in the bank from £1,000 to £30,000 , and want to invest their money in property. They may have no idea how to get into the property market; or they don’t have enough for a deposit; or they have some kind of bad credit history; or they don’t want to get involved with loans and interest; or they simply don’t have the time. Some investors will be looking to make a quick profit. For them we will be offering buy-to-sell properties. These may require some renovation work, and then can be sold at a good price. Other investors may be looking for steady income. For them the buy-to-let properties will be more suitable.

AL: Is PropTech Crowd regulated?

JK: Yes it is. We are an appointed representative of ShareIn Ltd (FRN 603332) which is authorised and regulated by the Financial Conduct Authority. There are strict rules that we have to abide by. That’s a good thing. Regulation stops “rogue” companies and individuals taking advantage of members of the public. We’re proud to be regulated.

AL: How is the Sharia compliance dealt with?

JK: PropTech Crowd is certified Sharia-complaint by Mufti Barkatulla, who is world renowned in the field of Islamic finance. He is also on the Sharia panel for other financial institutions, such as Al Rayan Bank UK.

AL: Are investors vulnerable, if your firm goes into liquidation?

JK: The investors’ SPVs are completely separate to PropTech Crowd. If for any reason PropTech Crowd stopped trading, this does not adversely affect the investors – as they still hold shares in the SPV that still owns a specific asset. Their investment is completely “ring fenced”.

There is probably no other similar property investment, where the investors know exactly where their money is. Specifically, our approach is unlike REITS (real estate investment trusts) – where investors’ money goes into a “pot”, and various properties are bought. If the REIT goes bankrupt, the investors could lose all their money. Their investment is in the REIT, not in the assets themselves. By contrast, our investors are in full control.

AL: How do you see the future of PropTech Crowd?

JK: Real estate crowdfunding is expected to reach $5.5 billion globally in 2017, and the World Bank predicts that by 2025 the crowdfunding industry as a whole will be worth $93 billion. We want to be part of this massively expanding disruptor to the banking world. Power to the people!

I am very excited about the huge potential of PropTech Crowd. Although we have launched recently with buy-to-let and buy-to-sell properties, we want to make a change to the community – such as by launching campaigns to fund social housing for key workers, especially in London. This is a massive problem. Teachers, nurses, paramedics, firefighters cannot afford to live in London, and often have to commute several hours every day. We could crowdfund projects in the capital and other major cities, where would be able to offer affordable housing. Although the returns would be lower, investors would know they are playing a positive role in the society. It’s about helping others, that’s a crucial aspect of ethical investment.

I’m actively looking to invest in the rise of Sharia – are you? Let us know:


Andrew Lockley
Exponential Investor