KUALA LUMPUR: A new form of crowfunding to provide a means for those who cannot afford and tackle property overhang that has now reached RM20 billion in value, may actually work, said industry specialists.
They said after the recent experiment that had shown progress in certain areas in Klang Valley, the time was ripe for the alternative solution especially when the value of property overhang had been creeping up.
Last week, the Securities Commission unveiled a property crowdfunding (PCF) framework, taking property investment to a whole new level.
The government, through the PCF, is turning to the wealth of the masses instead of banks, to help solve a multi-billion ringgit property overhang.
Malaysia reportedly has more than 30,000 units of unsold residential units with no takers because banks have put in place stringent lending guidelines.
Property crowdfunding offers an alternative for home buyers, Finance Minister Lim Guan Eng said at the framework unveiling on Friday, after he warned banks that he may take action against them for rejecting housing loan applications without reason.
Asianland Realty Sdn Bhd director and licensed auctioneer Warrick Singh said the time was indeed ripe for alternative real estate financing strategies, mooted by the private sector, to move away from straight jacket textbook guidelines of bank conventional financing.
He said the interest rates maybe not be based on the industry norm of base rate and base lending rate (interest rates) but adjusted appropriately to accomodate 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,” he said when contacted by the New Straits Times.
"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," he added.
Warrick said a journey of a thousand miles normally starts with the first step in an effort to provide a roof over the head of B40 and their families who make up a sizeable population in the country.
"Fundamentally the recent 2018 NAPIC report seems to indicate a mismatch of properties (leading to an overhang) attributed to locations/their connectivity and closeness to the centre of economic gravity in context of individual locations," he said.
"It is indeed heartening to note (that) there appears political will to evaluate alternative real estate financing strategies albeit too the recent crowd funding mechanism floated by the securities commisaion," he added.
SuperiorWealth Resources founder and chief executive officer Alan Poon said the initiative announced in Budget 2019 can be seen as a alternative financing model for home purchaser as claimed by the government but its effectiveness takes time to be seen.
In the meantime, he said industry stakeholders observing the market take a cautious role as to whether the overhang of units can be curtailed by offering another financing option in the market.
Much have been commented on the risk of providing such P2P platform in the real estate scene as the hungry investors who bridge the seller and buyer without the need of traditional financing will be driven by profits hence making property investment even more speculative than before, he added.
"Many what 'ifs' and 'buts' as to whether a property which are to be financed can rise in value or even be bought at its real value and not inflated price."
Perhaps, Poon said a much proper success recipe by the government would be to setup a taskforce with stakeholders representing both supply and demand side to be on few roundtable sessions to ensure the success of such alternative policy beyond just pure announcement which creates more suspicion and speculation from the market.
