Innovative financing scheme to spur home ownership

This article first appeared in The Edge Financial Daily, on November 5, 2018.
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SEMENYIH: The Edge Media Group’s subsidiary, EdgeProp Sdn Bhd, has launched an innovative property portal that connects first-time homebuyers and institutional investors in a mutually-supportive relationship.

The platform, dubbed “FundMyHome.com”, enables buyers to fully own a home by paying only 20% of the property’s price, while the balance 80% is contributed by participating institutions, who share the returns from the changes in the future value of the homes.

For starters, the participating institutions are Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd.

The Edge Media Group chairman Datuk Tong Kooi Ong said he is confident that there will be more institutions participating in the scheme moving forward.

He noted that today, the heavy reliance on debt to finance ongoing lifestyle is the main obstacle for consumers to own their homes.

“The real crux of the problem is the fact that consumers the world over, including in Malaysia, have relied too heavily on debt to finance their lifestyle. Because they are already indebted and paying interest on those debts, they can no longer borrow to buy a home.

“FundMyHome is created to provide a game-changing solution to these challenges faced by first-time homebuyers. It enables homeownership without a bank loan, which means there will be no monthly repayments,” Tong said at the launch of the new property portal by Prime Minister Tun Dr Mahathir Mohamad here yesterday. He also presented the first three homebuyers on the FundMyHome portal with keys to their homes, all located at Eco Majestic’s Harmoni Apartments in Semenyih.

Currently, EdgeProp is in discussions with the Securities Commission Malaysia (SC) and Bank Negara Malaysia to finalise the terms and conditions, as well as the framework of FundMyHome.

Tong said FundMyHome.com also aims to be compatible with peer-to-peer home financing after the SC released its regulatory framework for such a financing method, which is slated for the first quarter of 2019.

“By then, ordinary investors like you and me can participate to be the investor that contributes 80% of the fund needed to acquire the property, and it may not be contributing the entire 80%. It can be investing a portion of it, [and] it operates like an exchange, so investor could even trade their portion of the property ... it becomes more liquid,” he said.

“For now, while we are waiting for [the] SC’s regulatory framework, institutions like Maybank and CIMB can participate in the scheme by allocating a sum of fund to finance the 80% portion of these properties on FundMyHome. Other institutions may do the same,” he added.

He said the 20% of the fund contributed by homebuyers will be placed in a trust account, and be used to pay off the 5% annual investment return to the participating institutions for a five-year period.

FundMyHome will feature some 1,000 units of homes in the first phase of its roll-out, priced less than RM500,000 each.

The properties are being offered by nine participating developers — Eco World Development Group Bhd, UM Land Bhd, IOI Properties Group Bhd, Mah Sing Group Bhd, Perbadanan Kemajuan Negeri Selangor, PNB Development Sdn Bhd, Sunway Bhd, Trinity Group Sdn Bhd and UEM Sunrise Bhd.

Tong said FundMyHome.com is confident there will be more homes available on the portal. All homes on FundMyHome are either completed or nearing completion, enabling buyers to move in soon after the completion of the buying process.

“Besides helping the homebuyers, it helps developers sell their properties. It also includes estate agents to facilitate sales and to guide their clients interested in becoming property investors,” said Tong.

“FundMyHome also democratises home ownership and stimulates the housing industry without any government expenditure or guarantees,” he said.