Friday 29 Mar 2024
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This article first appeared in Personal Wealth, The Edge Malaysia Weekly on June 3, 2019 - June 9, 2019

Property has always been an important and lucrative asset class for investors. Real estate investment trusts (REITs) and direct ownership of property are two common ways of investing in the asset class. Over the past decade, however, another vehicle has been gaining in popularity — property crowdfunding.

This form of investing is especially popular in countries such as the US and the UK. According to CFX Markets, a secondary market for alternative assets in the US, the property crowdfunding industry is projected to grow to more than US$300 billion by 2025. Some of the more popular platforms include Fundrise, RealtyMogul and Property Partner.

The concept of property crowdfunding is simple. A group of investors pool their resources to buy an asset, which could be a residential or commercial development. The property is managed by a third party. Each investor gets a share of the asset and enjoys returns if the development is successful. However, they do not get to live in the property.

The Securities Commission Malaysia recently released a regulatory framework for property crowdfunding (PCF) platforms that fund home purchases for first-time homebuyers.

Retail investors are allowed to access PCF platforms and trade their notes on the secondary market. But the PCF operator will have to put in place and disclose beforehand exit terms, including how returns (dividends or capital gains upon exit) will be distributed to investors and homebuyers.

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