Last updated September 15th, 2018.
Real estate crowdfunding is only getting started in Asia. That means huge opportunities in the world’s most dynamic region.
In case you’ve been living under a rock, crowdfunding is the collection of money from a large group of people in order to finance a project. Usually this happens through the internet.
Crowdfunding was originally limited to start-up companies, campaigns, or donations. But pooling together small amounts of money for an expensive goal is now spreading to other investments – namely, real estate.
Property crowdfunding is already popular in the United States. This is partially due to new legislation that permits the raising of funds online. However, different laws in Asia may hinder the growth of these new investment platforms.
For example, the Monetary Authority of Singapore (MAS) regulates the collection of public funds yet not the real estate market.
Because of this, one way to crowdfund is buying international real estate (in this case, property not located in Singapore) through a fund collection platform based in Singapore.
Crowdfunding: A New Way to Buy Property in Asia
One Singaporean website is doing exactly this. CoAssets.com collected more than SG$3,000,000 from over 1,300 users during their first six months of operation.
Individuals are able to invest in real estate developments located in Malaysia, Thailand, Philippines, Australia and China.
Property crowdfunding in Asian markets is still in its infancy. However, there are several different reasons why it could become the next big thing in places like Singapore and Thailand.
If you think about it, co-ownership of properties is already widespread. It’s been this way for decades worldwide. Timeshares and real estate investment trusts are great examples.
The only difference is that by using the internet as a distribution channel, co-ownership is less bureaucratic by eliminating fees, middlemen, and complexity. Crowdfunding is merely an evolution of what already is.
Perks of Asia’s New Crowdfunding Sector
Smaller developers will benefit from property crowdfunding’s rise too. Banks are hesitant to loan property developers amounts between SG$1 million and SG$10 million.
The small fees just aren’t worth the additional paperwork. Crowdfunding would give SMEs in Asia an alternative to bank financing.
It will also make the real estate market more accessible for investors. They’ll be able to buy part of an apartment, office building, or retail store.
These types of commercial properties usually have higher rental yields than residential units. Yet they’re far too expensive for most buyers.
Real estate crowdfunding will eventually make its way across the Pacific from the United States to Asia. Lack of regulation, anonymity of both parties, and other risks make some investors skeptical though.
Crowdfunding is clearly a success for some types of transactions. Websites such as Kickstarter and IndieGogo have proven this. Time will tell whether real estate investors in Asia will benefit from it.
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