Crowdfunding is the collection of money from a large group of individuals in order finance a project, start-up company, or campaign. It usually happens through the internet. Pooling together small amounts of money for an expensive goal is now spreading to other investments – specifically, 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.
In Singapore, for example, the Monetary Authority of Singapore (MAS) regulates the collection of public funds, but not the real estate market. Because of this, one way to crowdfund is to buy international property (in this case, property not located in Singapore), through a fund collection platform based in Singapore.
A New Way to Invest in Asia Real Estate: Property Crowdfunding
One Singaporean website is doing exactly this. CoAssets.com collected over 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 is still in its infancy, but there are several different reasons why it could become the next big thing in Asia.
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.
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. SMEs would have an alternative to bank financing.
Crowdfunding will also make the property market more accessible for investors. They’ll be able to buy part of an apartment, office building, or retail store. These types of properties usually have higher rental yields than residential units, but are too expensive for most.
Real estate crowdfunding will eventually make its way across the Pacific from the United States to Asia. But the risks, lack of regulation, anonymity by both parties, and other issues make some skeptical.
Crowdfunding is unarguably 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 can benefit from it.
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