In 2021, capital invested in European real estate from abroad reached 76 billion euros: a Y-o-Y increase of 36 percent. According to real estate consultant Savills, from 2020 to 2021, intra-European investment also grew by eight percent to 81 billion euros.
Cross-border real estate transactions stayed buoyant during the pandemic. This is also evident through the EY study “Global Capital Confidence Barometer”, which found a general increase in interest in cross-border transactions. In a survey of 2,400 executives, 65 percent of them said they would engage in cross-border transactions.
So what are some of the challenges companies may face, during the process of cross-border transactions?
Different minimum standards and regulations
It is important to know how the real estate market and transaction business work in different European markets, as thorough documentation of the sales process is required for cross-border transactions to proceed successfully.
General risk factors may include national and regional tax regulations, data protection policies, the availability and reliability of the company’s financial data, or legal issues relating to patents and trademarks.
You have to ask yourself: What regulatory requirements apply in the respective target country, what special features have to be observed in the respective market and how are the work processes handled internally and externally?
Cultural and linguistic barriers
Cultural and linguistic differences may present difficulties in conducting negotiations, drawing up the purchase agreement and working together.
Deal makers must follow specified business processes with transparency in order to prevent competence mismatches or unintentional errors. Virtual data rooms are ideal for this purpose, where all relevant steps are documented, tracked and uniformly regulated on one platform.
Drooms’ software also plays an important role in bridging the gap between language barriers and data safety. Its AI-supported translation tool enables instant translation into the preferred language while maintaining the same document layout. Sensitive information is also kept and translated on one platform, to eliminate potential data leak on external translation sites.
Data access and transparency
Another challenge in the asset documentation process when doing a cross-border deal, is data access and transparency. Sellers need to ensure documents relevant to the respective transaction can be accessed by the authorised party at any time, from anywhere.
This requires a “single source of truth”: a centralised database that has been populated with the necessary information in a structured manner and is updated regularly.
Benefits of using a data room
Cross-border real estate transactions can be supported by data rooms in three ways:
Communication and improved workflows: The internal communication flow is optimised through structured processes, and misunderstandings are prevented when the latest versions are automatically saved. Drooms’ AI-supported translation feature also comes in handy, by enabling people from different countries to view documents in their own language.
Security: Data protection and security must always be the top priority for all parties involved, especially in Europe, due to the strict requirements of the EU-wide General Data Protection Regulation(GDPR). As a European, GDPR compliant provider, with servers exclusively in Europe, Drooms meets the highest standards in the area of data security.
Review and analysis: One of the most important part during a transaction, is the due diligence process. The standardised mapping of the information and the transparency provided with review history gives you maximum control of your data, and understanding of what potential investors are interested in.
To learn more about how Drooms can help you optimise your workflow during a deal, contact us!