Property crowdfunding will address glut and mismatch

First-time house buyers will only pay 20% of the value of the home, while the remaining 80% will be taken up by investors

By AFIQ AZIZ

The government yesterday launched a property crowdfunding initiative as the authority seeks to empower more people to buy homes and reduce the RM22 billion property glut which could dent the country’s financial system.

The property crowdfunding move, claimed to be the first such scheme in the world, will allow first-time house buyers to only pay 20% of the value of the home, while the remaining cost will be taken up by investors under a peer-to-peer (P2P) financing framework.

Property developers have been saddled with rising unsold properties under their belt in the last few years and have pinned the blame due to the absence of easier financing scheme.

Many house buyers have been turned away by lenders due to their weak credit rating and excessive borrowings. The scheme will also fix the property market mismatch that has shrouded the industry for the past few years, including to mop up the affordable units.

Prime Minister (PM) Tun Dr Mahathir Mohamad said the property crowdfunding mechanism would become an alternative solution to correct the property market situation and push the agenda to build one million affordable houses in the next 10 years.

“They can borrow money from banks and the money will be their contribution for the purchase…just 20% of the price of the house, the balance (80%) will be bought by investors.

“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…they just claim ownership to the level they have invested, but the house fully belongs to the buyer,” he said after launching FundMyHome.com, the country’s first private sector-driven property crowdfunding platform in Semenyih, Selangor, yesterday.

Property developers have been saddled with rising unsold properties under their belt in the last few years and have pinned the blame due to the absence of easier financing scheme (Pic: TMR)

Also present were Finance Minister Lim Guan Eng, Deputy Housing and Local Government (KPKT) Minister Datuk Raja Kamarul Bahrin Shah Raja Ahmad, Selangor Mentri Besar Amiruddin Shari, EcoWorld Development Group Bhd chairman Tan Sri Abdul Rashid Abdul Manaf and The Edge Media Group chairman Datuk Tong Kooi Ong.

The initiative was announced by Lim when he tabled Budget 2019 last Friday. The government had also made RM1 billion available at a very low lending rate for house buyers.

The P2P financing framework will be regulated by the Securities Commission Malaysia (SC). It is expected to go ‘live’ in the first quarter of next year. The scheme is only for first-time home buyers.

FundMyHome is a P2P exchange property platform that allows first-time home buyers and institutional funders to enter into a mutually supportive agreement.

Subject to the SC’s approval and the finalisation of the framework, buyers only pay as low as 20% from the value of the house, while the remaining 80% will come from investors of the platform.

Unsold property has reached up to RM22.5 billion, with 73% of the units are houses priced at RM250,000 and above.

Last week, Sime Darby Property Bhd chairman Tan Sri Dr Zeti Akhtar Aziz, who is also Permodalan Nasional Bhd (PNB) group chairman, had also commented that property prices will definitely have to be adjusted to the softening demand.

Tong said the property exchange would allow anyone to invest in a new asset class with low risks and potential capital gains over the long term.

“Currently, we are also joined by our biggest banks, Malayan Banking Bhd and CIMB Bank Bhd, which are contributing to the 80% of the home price,” he said, adding that about 1,000 units of affordable homes were offered by nine developers in the event, including EcoWorld and PNB Development Sdn Bhd.

Dr Mahathir said property investment normally yielded good returns as the value of property goes up even if the house is older.

“One of my staff bought his house for RM35,000 and now people are asking (to buy it) at a price of RM130,000. The house value always goes up.

“The land value, for instance: In the past, you could buy land at RM100 per sq ft. But now, the land value is at RM7,000 per sq ft,” he said.

But the PM said the success of the scheme could only be seen after it is fully implemented.

“I want to see the house, I want to see the owner…if this works, then more people will be able to buy houses and more can be built,” he said.

The government is expected to launch the new National Housing Policy this month, together with the National Affordable Housing Council (NAHC) which would be chaired by Dr Mahathir.

A blockchain expert, SysCode Sdn Bhd CEO Reza Ismail told The Malaysian Reserve (TMR) that the P2P initiative would be viable via the usage of smart contracts — a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance.

“It could define the rules of financing and also manage fund disbursement — almost similar to the idea by ethereum founder,” he said.

Raja Kamarul Bahrin Shah says it will not be delayed again as we have got the budget for next year (Pic by Muhd Amin Naharul/TMR)

Meanwhile, Raja Kamarul Bahrin Shah told TMR that the emergence of new housing policy, and the NAHC — which is set to streamline all affordable housing agencies through one same scheme — will be launched soon.

“The minister would announce it in the next two weeks or by the end of this month. It would not be delayed again as we have got the budget for next year. So, we have a better idea on what kind of budget we are working with,” he said.