Don’t rush into property crowdfunding, homebuyers advised

20 May 2019 / 19:25 H.

PETALING JAYA: Industry experts have lauded the government’s move in introducing property crowdfunding as an alternative form of financing for first-time homebuyers but warned homebuyers to be wary of the risks before participating in such schemes.

CBRE-WTW managing director Foo Gee Jen (pix) commended the Securities Commission Malaysia (SC) for taking such an initiative as it is the right move to provide other options for home ownership.

“However, I have my reservations about the scheme. The SC must be very firm with the message that this platform is an alternative investment and that it does not equal to total ownership of the house (unless the homebuyer successfully acquires the house at the end of the tenor),” he told SunBiz.

He said it is important to educate the public on how the scheme works as well as the risks involved.

“The homebuyer is not really a homebuyer until the end of the tenor. The homebuyer is an investor. The homebuyer/investor must have the mindset that they are coming in as an investor. It is crucial to distinguish the difference between purchaser and investor,” he added.

Through the platform, homebuyers can raise financing through the crowd and use the period of tenor to accumulate financial resources.

The platform is only open to Malaysian first-time homebuyers aged 21 years old and above while the residential property listed on the platform must be completed with Certificate of Completion and Compliance, and valued at a maximum of RM500,000.

Homebuyers are required to stay in the property for the duration of the tenor but are allowed to sublet rooms. The financing limit is up to 90% of the value of the property.

The SC also released the revised guidelines on the requirements and obligations of a property crowdfunding platform operator, to support the integrity of the scheme and protect investors’ interests.

The requirements include minimum shareholders’ funds of RM10 million; obligation to provide fair, clear and timely information to both homebuyers and investors; and exit certainty at the end of the agreed tenor.

While property crowdfunding may help some first-time homebuyers start their journey towards home ownership, Foo does not foresee first-time homebuyers rushing into such schemes.

“Not many people will be able to get the concept as it is not so straight forward compared with home loans. The homebuyer/investor must understand how the instrument works and what are their risk profiles. Homebuyers must be mindful when participating in property crowdfunding,” he said.

“I would say that this platform provides easier entry for investors who want to eventually be the buyer,” he added.

Foo urged the SC to be very strict with the independent property valuers to avoid the platform becoming a tool for people with vested interests.

“The valuer at the starting point should be the same valuer at the exit as well. This is because a valuer may disagree with another valuer’s pricing. Having the same valuer at the starting and exit points would eliminate this issue as the valuer cannot disagree with his or her own pricing.

“We want valuers to be objective in their valuation. Therefore, governance on the valuer has to be very objective. In order to protect public interest, a certain level of governance, capacity and track record is needed on the part of the valuer,” he said.

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