Property Crowdfunding May Address Property Overhang
Industry specialists believe a new form of crowdfunding, which will provide a means for those unable to afford while addressing the property overhang at the same time, might actually work, reported The New Straits Times.
With a recent experiment indicating progress in certain areas within Klang Valley, the time was right for the alternative solution particularly when the value of property overhang has now reached RM20 billion.
The Securities Commission introduced a property crowdfunding (PCF) framework last week.
Through the PCF, the government is turning to the wealth of the people instead of banks to solve the massive property overhang problem.
Malaysia reportedly has over 30,000 unsold residential units with no potential buyers as banks set up stringent lending guidelines.
Finance Minister Lim Guan said property crowdfunding provides homebuyers with an alternative option, after warning banks that he might take action against them for refusing to grant housing loans for no reason.
Asianland Realty Sdn Bhd director and licensed auctioneer Warrick Singh agrees that conditions are ripe for alternative real estate financing solutions and move away from rigid textbook guidelines of bank traditional financing.
He noted that interest rates may not be based on the usual base lending rate and base rate, but rather adjusted to accommodate returns for “investor financing”.
“An experiment with this new norm has already been initiated in Semenyih, for example, the rent-to-buy platform with user-friendly features. Agreed interest rates could be a notch or two higher but it has at least got housing off the ground for the B40 segment and a roof over their heads plus their young families,” Warrick said.
“It is indeed heartening to note (that) there appears political will to evaluate alternative real estate financing strategies albeit too the recent crowdfunding mechanism floated by the securities commission,” he added.
Meanwhile, SuperiorWealth Resources founder and chief executive officer Alan Poon said industry stakeholders are cautiously observing whether the property overhang can be solved with the offering of another financing option in the market.
“Many what ‘ifs’ and ‘buts’ as to whether a property which is to be financed can rise in value or even be bought at its real value and not inflated price.”
He suggested for the government to create a task force with stakeholders representing the supply and demand sides, and which would regularly meet to ensure the alternative policy’s success beyond pure announcement that creates more speculation and suspicion from the market.