Homebuyers Warned Against Rushing Into Property Crowdfunding

 

While they lauded the introduction of property crowdfunding as an alternative source of financing for first-time homebuyers, industry experts also warned buyers to be cautious of the risks before signing up for such schemes, reported The Sun Daily.

CBRE-WTW managing director Foo Gee Jen praised the Securities Commission (SC) for introducing the initiative, which he believes is the right move in providing 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 tenure),” he said.

The platform helps homebuyers raise financing from the crowd and use the period of tenure to secure financial resources.

The scheme is open exclusively for Malaysian first-time homebuyers who are at least 21 years old, while the residential property covered should be completed with Certificate of Completion and Compliance and a maximum value of RM500,000.

READ MORE: What A First-Time Home Owner Needs To Know About Downpayments

With this, Foo stressed the importance of educating the public on how the scheme operates, as well as the risks that come with it.

“The homebuyer is not really a homebuyer until the end of the tenure. 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.

To support the integrity of the scheme, the SC has unveiled the revised guidelines on the requirements as well as obligations of a property crowdfunding platform operator.

With a minimum shareholders’ funds of RM10 million, a platform operator has an obligation to provide clear, fair and timely information on both investors and homebuyers; as well as an exit certainty at the end of the tenure.

Despite this, Foo does not expect first-time homebuyers to rush into the scheme.

“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.

 

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