What is Property Crowdfunding?
Malaysia’s Budget 2019 announced the launch of property crowdfunding as an initiative to help first home owners buy their first home. Home buyers just need to pay 10% upfront of the purchase price while the other 90% is funded by investors. After 5 years, the home buyer decides whether to keep the property or sell it.
Prime Minister Tun Dr Mahathir Mohamad is confident that the property crowdfunding which was announced in Budget 2019 can drive the building of one million houses in 10 years as promised by Pakatan Harapan (PH) in its election manifesto for the 14th general election (GE14).
The premier said the property crowdfunding, the first of its kind in the world, offers first-time home buyers the chance to pay only a small portion to own a house while the remaining amount will be funded by investors via a peer-to-peer financing framework.
He said property crowdfunding would enable more people to own a house with minimum payment, which could be settled by their savings, loans or the Employee Provident Fund (EPF) withdrawal.
“It’s also like the REIT (real estate investment trust) where anyone who wants to invest can do so. This does not mean the investor will enter the home, just claim ownership to the level invested, but the house fully belongs to the buyer,”
Property Crowdfunding Buyer Eligibility:
Age 18 years above
First time home buyer
The Difference With Malaysian Property Crowdfunding
Crowdfunding is fast becoming the go to source for funding for various businesses and projects in Malaysia, and the real estate industry is now following this trend and introducing crowdfunding options that looks to benefit both buyers and real estate investors. This is how the property crowdfunding offerings differs within the Malaysian and overseas market.
One of the stark difference between crowdfunding within Malaysia real estate industry and the overseas industry is that the real estate overseas market focuses mainly on crowdfunding for the investor whereas Malaysia focuses on benefiting the buyer.
With the intention to explore and move away from the traditional forms of investing, real estate investors and business owners can opt to crowdfund properties they aim to invest in. Through crowdfunding campaigns investors can now source several investors at a time to contribute smaller sums as opposed to depending on the commitment of one investor. This is beneficial as it eases access to capital growth and allows investors to expand their audience reach. This process however defers in the Malaysian context.
Thanks to the initiative set by the current government’s Budget 2019, which saw the launch of the Peer-to Peer property crowdfunding which lead to the endorsement of Malaysian PCF – property crowdfunding platform Sharedworth. The opportunity is most suited to first time home buyers, whereby the buyer pays an upfront purchase price of either 10% or 20% whereas the balance is covered by investors. As a whole, incorporating crowdfunding has offered a great alternative to traditional investing and purchasing methods. It broadens the horizons in real estate purchasing as it expands options for property buyers and investors when making property investments as well as offers a wider opportunity for first time home buyers to purchase their first homes without having pay large initial sums of money.