KUALA LUMPUR: Malaysian Institute of Professional Property Managers and Facility Managers (MIPFM) is suggesting property and facility management to be treated independently from valuation.
President Sarkunan Subramaniam said the bias towards valuers had to stop if property management is to progress in today’s fast-changing digital and technology capabilities.
“I urge the Board of Valuers, Appraisers, Estate Agents and Property Managers to reconsider its decision and listen to the professional bodies.
“Giving a property management licence to one who has no or little experience in property management is dangerous,” he said.
Sarkunan was speaking at the MIPFM Conference 2018 on Bridging Property Management and Facility Management.
He said the current real estate degrees are skewed towards valuation subjects. Those who trained in predominantly valuation-based companies have little to no experience in managing properties.
Government valuers, having passed valuers test, are automatically handed the property management licence.
Sarkuanna, himself a valuer, is calling for objectivity. He said the diverse range of office buildings, mixed integrated projects and stratified residential projects must be matched with parallel top grade maintenance. Or their value may suffer.
“I will get a lot of opposition for my views but this is for the good of the real estate sector,” he said.
Sarkunan also highlighted the rife corruption in this field. “Corruption in procurement, kickbacks and side money is so prevalent that it has rusted performance, bringing many buildings to a grinding halt,” he said.
Sarkunan related the tale of two office blocks in Bangsar where seven out of its nine management committee (MC) members have resigned, the chairman among them.
Those who resigned were from Tower A, which the developer had earlier sold to private individual owners. Tower B belonged to the developer who had put the building under a real estate investment trust.
There was a cash surplus in the accounts. It seems that during the period when the developer was managing the property, the developer apportioned all surplus monies collected to the tower they retained. When the MC took over, it faced a defiant developer.
The Commissioner of Buildings has directed an extraordinary general meeting to be held.
In another case, a developer refused to pave the way for a joint management body (JMB) to be formed because it wanted to control the money collected, Sarkunan said. COB stepped in to resolve the issue.
Transparency International Malaysia president Datuk Seri Akhbar Satar said fraud and corruption is common due to the variety of goods and services involved.
Satar said that in 2010, Palm Court Condominium residents alleged that about RM144,000 was misappropriated. The committee agreed to take “appropriate measures” but refused an independent audit.
On Jan 31, 2017, members of a JMB were arrested by the Malaysian Anti-Corruption Commission for allegedly misappropriating RM1.5mil.
Satar said cases like these highlighted the need for a culture of integrity and transparency.
NEW Year always come with new resolutions. Finance is an important aspect of most people’s checklists when it comes to planning new goals.
While it is good to set new financial targets, it is also vital to re-look at our debt portfolio to ascertain if it is at a healthy state.
At a national level, our country also has its financial targets matched against its debt portfolio.
According to the latest Risk Developments and Assessment of Financial Stability 2016 Report by Bank Negara, the country’s household debt was at RM1.086 trillion or 88.4% of gross domestic product (GDP) as at end 2016.
Residential housing loan accounted for 50.3% (RM546.3bil) of total household debts, motor vehicles at 14.6%, personal financing at 14.9%, non-residential loan was 7.4%, securities at 5.7%, followed by credit cards at 3.5% and other items at 3.6%.
Evidently, residential housing loan is the highest among all types of household debt. However, a McKinsey Global Institute Report on “Debt and (Not Much) Deleveraging” in 2015 highlighted that in advanced countries, mortgage or housing loan comprises 74% of total household debt on average.
As a country that aspires to be a developed nation, a housing loan ratio of 50.3% to total household debt would be considered low, compared to 74% for the advanced countries. In other words, we are spending too much on items that depreciate in value immediately – such as car loans, credit card loans and personal loans – compared to assets that appreciate in value in the long run, such as houses.
Advanced economies, which are usually consumer nations, have only 26% debts on non-housing loan as compared to ours at 49.7%.
In order to adopt the household debt ratio of advanced economies, our housing loan of RM546.3bil should be at 74% of total household debt. This means that if we were to keep our housing loan of RM546.3bil constant, our total household debt should be reduced from the current RM1.086 trillion to a more manageable RM738bil. This would require other non-housing loans (car loans, credit card loans and personal loans etc) to reduce from 49.7% of total household debt to only 26%. To achieve this ratio, the non-housing loan debt must collapse from the current RM539.7bil to only RM192bil.
Reducing total household debt from the current RM1.086 trillion to a more manageable RM738bil would also have the added benefit of reducing our total household debt-to-GDP ratio from the high 88.4% to only 60%, making us one of the top countries globally for financial health.
Malaysia’s household debt at present ranked as one of the highest in Asia. Based on the same 2015 McKinsey Report, our household debt-to-income ratio was 146% in 2014 (the ratio of other developing countries was about 42%) compared to the average of 110% in advanced economies.
Adjusting the debt ratio by reducing car loans, personal loans and credit card loans will make our nation stay financially healthy.
Car values depreciate at about 10% to 20% per year based on insurance calculations, accounting standards and actual market prices. Assets financed by personal and credit card loans typically depreciate immediately and aggressively.
The easy access to credit cards and personal loan facilities tend to encourage people to spend excessively, especially when there is no maximum credit limit imposed on credit cards for those earning more than RM36,000 per year.
If we maximised the credit limit given without considering our financial ability, we will need a long time to repay due to the high interest rates, which ranged from 15% to 18% per annum.
Based on a report in The Star recently, Malaysia’s youth are seeing a worrying trend with those aged between 25 and 44 forming the biggest group classified as bankrupt.
The top four reasons for bankruptcy were car loans (26.63%), personal loans (25.48%), housing loans (16.87%) and business loans (10.24%).
It is time for the Government to introduce more drastic cooling-off measures for non-housing loans in order to curb debt that is not backed by assets. This will protect the rakyat from further impoverishment that they are voicing and feeling today.
As we kick start the new year, it is good to relook into our debt portfolio. When we are able to identify where we make up most of our debts, and start to reallocate our financial resources more effectively, we will be heading towards a sound and healthier financial status as a nation.
By Alan Tong - Food for thought
Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please e-mail feedback@fiabci-asiapacific.com.
One way to solve housing shortage problem is to build more houses.
"If we take a look at countries with commendable housing policies such
as Singapore and Hong Kong, we notice that the government plays a very
important role in building and ensuring a sufficient supply of housing
for their people."
THE issue of affordable housing has been a hot potato for many countries, especially for a nation with a growing population and urbanisation like ours.
In my previous article, I mentioned that there was a growing shortage of affordable housing in our country according to Bank Negara governor Tan Sri Muhammad Ibrahim. The shortage is expected to reach one million units by 2020.
According to Bank of England governor Mark Carney, one of the most effective ways to address the issue is to build more houses. There are good examples in countries like United Kingdom, Australia and Singapore, which have 2.4, 2.6 and 3.35 persons per household respectively.
In comparison, the average persons per household in our country is 4.06 person, a ratio which Australia had already achieved in 1933! To improve the current ratio, we need to put more effort into building houses to bring prices down.
If we take a look at countries with commendable housing policies such as Singapore and Hong Kong, we notice that the government plays a very important role in building and ensuring a sufficient supply of housing for their people.
For example in Singapore, their Housing and Development Board (HDB) has built over one million flats and houses since 1960, to house 90% of Singaporeans in their properties. In Hong Kong, the government provides affordable housing for lower-income residents, with nearly half of the population residing in some form of public housing nowadays. The rents and prices of public housing are subsidised by the government and are significantly lower than for private housing.
To be on par with Australia (2.6 persons per household), our country needs a total of 8.6 million homes to house our urban population of 22.4 million people. In other words, we need an additional 3.3 million houses on top of our existing 5.3 million residential houses.
However, with our current total national housing production of about 80,000 units a year, it will take us more than 40 years to build 3.3 million houses! With household formation growing at a faster rate than housing production, we will still be faced with a housing shortage 40 years from now.
Therefore, even if the private sector dedicated all its current output to build affordable housing, it will still be a long journey ahead to produce sufficient houses for the nation. It is of course impossible for the private sector to do so as it will be running at a loss due to rising costs of land and construction.
In view of the above, the government has to shoulder the responsibility of building more houses for the rakyat due to the availability of resources owned by the government. Land, for example, is the most crucial element in housing development. As a lot of land resources are owned by government, they must offer these lands to relevant agencies or authorities to develop affordable housing.
I recall when I was one of the founding directors of the Selangor State Development Corp in 1970s, its main objectives was to build public housing for the rakyat.
However, today the corporation has also ventured into high end developments in order to subsidise its affordable housing initiatives. This will somehow distract them from focusing on the affordable housing sector.
Although government has rolled out various initiatives in encouraging affordable houses, it is also important for the authorities to constantly review the original objectives of the relevant housing agencies, such as the various State Economic Development Corporations, Syarikat Perumahan Negara Bhd, and 1 Malaysia People’s Housing Scheme, to ensure they have ample resources especially land and funding to continue their mission in building affordable housing.
A successful housing policy and easy access to affordable housing have a huge impact on the rakyat. It is hoped that our government escalates its effort in building affordable housing, which will enhance the happiness and well-being of the people, and the advancement of our nation.
Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.
AS we all know, affordable housing is the saving grace for the middle to low income group in our common dream to pursue the “roof over our heads”.
Most often, aspiring homebuyers are sandwiched between increasing property price and developers’ tendency to build high-end apartments especially in greater KL for the last decade.
The introduction of PR1MA and other affordable housing agencies by the federal government is aimed at addressing this gap and to promote better home ownership as part of the prime minister’s national transformation programme. Nonetheless, not many realised that affordable housing is also a state initiative whereby state governments are free to introduce affordable housing schemes given that land and development are within the exclusive power of the state under the Federal Constitution. For instance, Penang is fully behind the notion of affordable housing by placing their top priority on increasing homeownership ratio within the state.
Checking online, there are currently 29 affordable housing projects in Penang with 12 being developed by the state government and the other 17 by the private sector. Penang is delivering a commendable amount of affordable housing by trading plot ratio of built-up area in exchange for more units to be built.
The state government is constantly reviewing and updating the criteria for the purchase of affordable housing in Penang. A person who already owns a property can still purchase affordable housing in Penang provided the person can satisfy the conditions imposed.
For example, the house to be purchased must be of higher value than the one already owned.
In addition, for those who are not born in Penang, under the talented and skilled category, they may also purchase affordable housing in Penang provided they undertake to reside there for a minimum of five years. In short, affordable has become a driver for talent retention. This ultimately helps to upgrade living standard in Penang.
On the flip side, Penang has uncovered a problem. Those who are entitled to affordable housing may not qualify for financing, especially those from the lower income group as they are considered as high risk by banks.
Job and income security at this level are extremely vulnerable given the high cost of living that in effect reduces disposal income. Bank and financial institution are after all profit-making entities. Loan disbursements below a certain threshold amount does not always generate their desire margin. Many expiring home owners are left helpless.
While nothing is perfect, one can only achieve success through lessons learned along the way and from history. The federal government is aware of the high loan rejection rate. It has, therefore, provided a 10% loan guarantee and First House Deposit Financing to help purchasers with their downpayments. The “Rent to Own” scheme was also introduced to circumvent the stricter loan financing situation.
Penang has introduced a similar Rent to Own scheme. Under this scheme, the state government provides 30% of the home price so that the house buyer can seek a 70% loan margin.
PR1MA, on the other hand, is facing difficulties finding suitable land as land is state matter. There is also a tendency for the state government to allocate land for this purpose in areas they want to urbanise, but which are often far from amenities and transportation links.
We all know that to develop affordable housing is not the best commercial decision to make because profit margins are definitely lower. As such, we cannot expect private sector developers to always bear the cost.
Penang, on the other hand, is able to overcome this problem by reducing the development charges via an increase in plot ratio. This then attracts private sector developers to come in.
A recent survey conducted by PR1MA shows that buyers prefer to purchase residential projects close to schools, clinics and shops. They also prefer access to transportation. Penang is closer to achieving its objective in the affordable housing arena because it “focuses on the homeowners”.
Under the recently announced Penang Transport Master Plan, the state government is mulling over RM8bil worth of projects that will enhance connectivity.
The development of an underground tunnel from Gurney Drive to Bagan Ajam, Gurney Drive to Jelutong Expressway and an alternative road connecting Gurney Drive right up to Batu Feringhi will really improve connectivity.
Penang is ambitious in executing its affordable housing plans. It is also spot-on when it comes to addressing the different issues connected with this subject.
The banking sector must buy into it. Banking and financial institutions are governed by the fiscal policy of the federal government. Maybe some mandatory quota or corporate social responsibility initiatives can be imposed on banks to provide loans to deserving house buyers. So it is timely that Bank Negara has called for a comprehensive and carefully designed National Planning Policy to support the Government’s aim in delivering more social housing in its recently released annual report.
By Chris Tan
Chris Tan is the founder and managing partner of Chur Associates.
Nov 23, 2015 ... By Chris Tan Real legal viewpoint. Chris Tan is the founder and managing
partner of Chur Associates. Related posts: High cost under new law ...
Aug 17, 2015 ... By CHRIS TAN Real Legal Related posts. Property prices will hold ... 2015
WHILE last week's article cove... Posted by Richard Tan at 4:46 PM.
Factors affecting prices - It is not easy to predict trend as the property market involves all kinds of players
THE year 2015 will always be considered one of the more challenging
years for the property sector, with several factors coming into play and
leaving potential buyers and investors cautious.
Looking back, Jordan Lee & Jaafar executive director Yap Kian Ann
says there were many factors – be it microeconomic or macroeconomic,
political, social, among others, that affected the property market
performance and its pricing either directly, indirectly and/or jointly.
Click for actual size: http://clips.thestar.com.my.s3.amazonaws.com/clips/business/property-prices-chart-1912.pdf
“These factors are inter-related and influence each other. Individually, they give direct and indirect impact to the property market, property transaction volume and property prices at a different direction and degree.
“As the property market involves players (buyers and sellers) with all kinds of behaviour and is subject to a combination of factors that affect its performance at a given point in time, it is not an easy task to predict its trend and degree accurately.”
Looking ahead, property consultancy VPC Alliance (KL) Sdn Bhd managing director James Wong expects 2016 to be more subdued than this year.
Wong says most developers have launched their products aggressively in 2014.
"They knew the market this year would be soft and this softening would be carried forward to 2016. The full impact of the expiry of the developers’ interest bearing schemes (DIBS) will be felt next year.
Under DIBS, property buyers need not service the loan until the property is completed. Introduced in 2009 as an incentive, speculators purchased multiple units under DIBS because of the initial low outlay.
He expects to see softening demand in the high-rise high-end residential sector in the central region of the Klang Valley in 2016. Landed residential property demand is still resilient, especially with the gated and guarded community concept. House prices are expected to “self-correct”, he says.
Wong says foreign investors are actively monitoring residential properties in Kuala Lumpur due to weak ringgit but they remain cautious.
The increase in interest rates by the Federal Reserve after nearly a decade is also keenly watched. Already, reports are filtering out that Federal Reserve’s sway on global interest rates is causing a sharp jump in Singapore’s benchmark borrowing cost, squeezing growth in the small Asian city-state.
On a state by state basis, MIDF Research said earlier this month that Johor’s house price index showed the slowest growth year-on-year at 3%, Penang (3.5%) while Selangor fared better at 6.2%, followed by Kuala Lumpur’s 5.3%.
“We believe that the outlook for property price is better in Greater KL (Selangor and KL) due to support from the urbanisation factor.”
Citing Bank Negara statistics, the research house also noted that demand for property loans declined 13% year-on-year in October 2015 to RM25.19bil.
“This was weaker than September 2015, which declined 9% year-on-year. On a monthly sequential basis, the data was 1% lower. We are negative on the data as the number was showing nine consecutive year-on-year declines since February 2015.
“Year-to-date October 2015, loans were lower by 7% year-on-year to RM253.88bil. In our view, consumer appetite for big ticket items such as property remains low due to the rising cost of living and the weakening ringgit.”
This alternative source of funding has helped many entrepreneurs achieve their dreams.
Ng (right) handing over a mock cheque to Jamaliatul Shahriah bt Jamaluddin, the project creator for YAKEEN Honey Booster after a successful round of funding on the platform.
CROWDFUNDING has gained a strong following as an alternative funding option over the past few years. Small businesses that have not been able to secure conventional financing are looking more and more towards the practice as a source of financing.
However, the level of awareness and interest in crowdfunding in Malaysia is still at its infancy stage, noted Fundaztic.com chief executive officer Kristine Ng.
“Maybe about one in 20 people have heard of the concept and understand exactly how it works. There are currently just a handful of noted platforms in the market. Some local companies try to raise funds on international platforms such as Indiegogo.com.
“There is still a lot more which local players need to do to gain the credibility and recognition to grow further. And having the support from the local community would be a great boost for us,” she said.
Fundaztic, which rolled out in June this year, is among the handful of local crowdfunding players in the market. The platform was founded by a group of ex-bankers and a lawyer who have been following the development of financial technology (FinTech).
The potential of crowdfunding as an alternative funding platform is huge, said Ng, because access to funds has always been an issue, especially for new businesses and new business sectors that are viable but yet to have proven track-records.
Furthermore, Malaysians tend to be generally cautious when it comes to adopting new technology. Additionally, having to overcome the hurdle of building confidence in the credibility of the platforms would take a lot of time and effort for crowdfunding to be a significant part of the funding scene here.
Fundaztic has listed eight projects on its platform so far, with four projects currently in active funding stage.
But crowdfunding has taken the world by storm in the western countries and established strong platforms such as Kickstarter.com and Indiegogo.com that have helped many entrepreneurs bring their dreams and aspirations to life. Reports have even noted the possibility that the crowdfunding industry could account for more funding than venture capital (VC) in 2016.
A recent report by Massolution said global crowdfunding is set to raise US$34.4bil for 2015. In comparison, the VC industry invests an average of US$30bil each year.
“We truly believe that crowdfunding is a proven platform for like-minded people to support each other, and epitomises the meaning of ‘people power’ in an extremely positive manner,” Ng said. Fundaztic has listed eight projects on its platform so far, with four projects currently in active funding stage.
“We are happy that two of the projects are over-funded and have helped the project creators, who are both women and homegrown entrepreneurs, to grow their business in a risk free manner.
“This is the strongest benefit of crowdfunding. Entrepreneurs can leverage on the platform to gauge the level of public acceptance and support towards their products before having to splash out the funds on their own to commercialise a product or to stock up on inventory,” said Ng.
Funding on Fundaztic is through the concept of cornerstone funding whereby projects that are not able to meet its funding goal but have managed to generate at least 80% of the required funding, can get a maximum of 20% of the required funds from Fundaztic itself.
“Because we truly want all projects to be successful, we would be more than willing to hand-hold in the curation of the project so that the message will sink in well with the local community and thus, enjoy a higher degree of success,” Ng concluded. - The Starbiz
Entrepreneurs Slow to Market Via Equity Crowdfunding Platforms
Brian Gallagher, CEO of United Way Worldwide, talks about the rise of Giving Tuesday and the latest trend in charitable
Equity crowdfunding platforms are providing a new and innovative way to raise money from angel investors that centralizes, streamlines, simplifies and shortens the fundraising process. Equity crowdfunding pools money from a group of investors via internet platforms, using social media and other types of marketing.
You might be surprised to learn that entrepreneurs, who are known for innovating in their products and services, are not innovating when it comes to the way they raise money. And angel investors, who put money into innovations, are not innovating in the way they invest. Few entrepreneurs are marketing their securities offerings to angels online via crowdfunding.
That’s unfortunate, since angel investors provide about half as much financing as venture capitalists: $24 billion compared to $48 billion, according to the Center for Venture Research and MoneyTree, respectively. Angels, defined here as accredited investors who earn $200,000 annually (or $300,000 as a couple), or have a net worth, excluding their homes, in excess of $1 million, are more likely than VCs to focus on seed and early-stage companies. The State of Private Companies Publicly Raising Financing
This new public-facing financing method became possible on September 23, 2013, when the SEC put into effect the rules and regulations that allow private companies to advertise their securities offerings to angel investors. Previously, public solicitation was prohibited. Entrepreneurs now can market their securities offerings through websites such as AngelList, CircleUp, Crowdfunder and Portfolia.
Yet surprisingly few companies choose to seek funding publicly. Last year, 382,000 companies sought to raise money from angels in the real world. Fewer than 100 companies were added to those already trying to do so in the online world between January 1 and June 30, 2015, according to Crowdnetic, which aggregates data from 18 equity crowdfunding platforms.
Women Entrepreneurs and Equity Crowdfunding: A Gap and Great Potential
Raising money via equity crowdfunding platforms has the potential to level the playing field for anyone raising money, but its impact may be greatest on underrepresented groups—such as women—who lag even further in taking advantage of this new approach. Women entrepreneurs are twice as likely to seek money offline from angels (36%) than publicly online (18%), according to the Center for Venture Research and Crowdnetic.
The average amount raised via crowdfunding is rising for companies in general ($412,000 as of the end of 2014 to $432,000 as of June 30, 2015) and falling for women-led companies ($331,000 as of the end of 2014 to $323,000 as of June 30, 2015).
This gap highlights tremendous potential. “The Kauffman Foundation reports that women build capital-efficient companies, generating 12% more revenue on one third less capital,” according to Kay Koplovitz, chairman and co-founder of Springboard Enterprises, an accelerator for women-led businesses in technology, media and life sciences. “[Think] how much more productive they could be if they raised capital on a par with men!”
Types of Securities Used
You may wonder what types of securities other entrepreneurs use when raising money. A majority (58%) issue stock as their method of financing. Nearly one third of entrepreneurs choose convertible note, which allows them not to set an equity valuation at the time of the investment or to simply pay back the money within a set period of time prior to taking in permanent equity capital.
There are other financing structure options, such as revenue sharing or royalty agreements, but these are far less likely to be used. Depending on your long-term goal for the company, a securities lawyer can advise you on which is the right form for you..
Top Locations for Equity Crowdfunding
It’s no surprise that the top location for equity crowdfunding activity and deals is the San Francisco/Silicon Valley area, both for entrepreneurs in general and for women-led companies in particular.
Over the past few decades, this area has developed a strong culture of entrepreneurship. It takes a village to build a growth company and to provide the ancillary support that makes growth possible. San Francisco/Silicon Valley has a long tradition of assisting high-potential entrepreneurs, not just with capital but with expertise and connections to customers, talent and vendors.
New York City is in second place. Worth noting are the high performance of relatively small cities such as Austin and Las Vegas, which rank among the top ten cities for raising money publicly online.
Other Signs That Equity Crowdfunding Is Gaining Credibility
Venture capitalists recognize the potential of crowdfunding and have invested in these platforms to the tune of $250 million in 2014, according to Massolution’s 2015CF Crowdfunding Industry Report. Big-name companies such as Coca-Cola, Nike, General Mills and Chrysler use crowdfunding platforms not to raise money but to gain insights into consumers.
CROWDFUNDING – the practice of funding a project or venture by raising small amounts of money from a large number of people typically using an online platform – has gained popularity due to the massive demand and supply in today’s competitive market.
In one way, it benefits start-ups and entities that require funds to either commence or expand their business portfolio.
Investors have the opportunity to participate in any potential investment that they are comfortable with and which corresponds to their personal investment portfolio via a simple click online. It is a chance to participate early in something potentially very big.
The Securities Commission has approved six equity crowdfunding platforms for issuers to offer share subscriptions to interested investors. This comes with strict compliance and regulations imposed on the platforms providing such equity crowdfunding services. The good news for investors is that these platforms, which represent another type of investment option, are expected to be launched very soon.
Rising property prices have increased the investment cost for real estate investors. Consequently, real estate investment trusts, which offer liquid stakes in real estate complemented by constant dividend yields, have become fashionable. Alternatively, real estate investors may also leverage on the informal real estate investors club that attracts a lower acquisition cost with bulk purchasing arrangements with developers.
We can draw one conclusion from these real estate investment options – that property investment is no longer an individual game but a team sport that thrives on leverage and collective bargaining.
There are even suggestions that political parties raise funds via crowdfunding in a bid to promote transparency and efficiency. This makes it easier to comprehend the call for crowdfunding in a sector like property. So, how does real estate crowdfunding work?
Online platform
The basic concept of crowdfunding is an online platform operated by an approved operator and regulated by a certain ministry that provides services to matchmake the issuer and the investor. The obligation of the operator is to conduct sufficient due diligence on the issuer and its product prior to allowing the issuer to campaign for fund-raising on its online platform.
To promote independence, there should not be any relationship between the operator and the issuer, and the operator should not personally join the fund-raising campaign by the issuer. Besides this, the operator has to approach private financial institutions or trust companies to set up trust accounts for the investment funds to capture, as trustee, those investors who are willing to invest in the issuer.
Similarly, to remain independent, the operator should not be related to the private trustees or financial institutions.
In this investment option, the utmost requirement for the issuer is that they shall be either a developer, a real estate agency or a land owner who owns the property slated for development and who is seeking to raise funds for that purpose. The operator may perform due diligence on the land background and require the issuer to show proof of ownership of the said land and also the proposed development plan. These are to be advertised on its platform as convincing tools to attract investors.
Nonetheless, contrary to conventional real estate investment where you would get the key to the property and may use it as a tangible asset for further financing in the future, any investment into the real estate crowdfunding platform does not give you ownership of an immovable property, unless it is agreed upon and offered by the issuer based on its fund-raising campaign.
The upper hand here is that the expected term for your return on investment (ROI) may be fixed and shorter. Investors may receive the expected ROI upon completion of the development. The investment amount is also within an affordable limit, and information is easily accessible via the Internet. Crowdfunding also promotes transparency in one’s investment and with collective investors, the bargaining power with the issuer is also greater as compared to individual investors.
Real estate crowdfunding might still be a new concept and some might have never heard of it until now, but with real estate investment running the risk of remaining merely a dream for the mid-range salary earner, it might be a good alternative to maximise returns on your hard-earned money without a hefty price tag.
However, as with all forms of investment, there are risks involved here despite the due diligence performed by the operators. Smart investors, nonetheless, always walk the extra mile to conduct their personal due diligence on the accuracy of the information made available on the crowdfunding platform.
The current regulatory framework only permits equity crowdfunding for the real estate business and is not yet a direct crowdfunding avenue into the acquisition of real estate.
By Chris Tan Real legal viewpoint
Chris Tan is the founder and managing partner of Chur Associates.
ON Thursday, at a seminar organised by Malaysia Property Inc, the Employees Provident Fund (EPF) said it would continue to seek “opportunistic” investments abroad.
There are various reasons why EPF and the other funds absolutely need to do so if they are to provide a steady dividend stream to contributors over the longer term and to diversify risk.
As we have seen the last year or so, the ringgit has come under tremendous pressure and year to date, it has weakened against most currencies, especially the US dollar, the British pound and the Singapore dollar.
Had EPF not made forays abroad in 2009, its 14 million odd contributors would not have received dividends ranging between 6% and 6.75% between 2011 and 2014 and in the interim years of 2012, 6.12% and 2013, 6.35%.
Prior to this, EPF declared dividends of 5.8% in 2007, 4.5% in 2008, 5.65% in 2009 and 5.8% in 2010.
The Asian financial crisis in 1997/98 and the 2008 global financial crisis were costly lessons for EPF and the other funds.
Before its move to buy property abroad in 2008, less than 1% of its total funds were invested in real estate. Today, it has the mandate to invest up to 4% of its total funds of about RM700bil in local and foreign properties. It can also invest up to 26% of its available funds in non-ringgit denominated investment instruments including bonds, securities, properties and other others.
So far, EPF has invested more than £1bil in UK and more than 1bil euros in France and Germany. It also has properties in Japan and Australia.
Its core investments in Europe, excluding UK, are in the office and logistics sector. In UK, it has offices, logistics and 12 hospitals under the Spire brand. It also has a 20% stake in Battersea Power Station mixed used project. According to its head of global real estate in the private markets department Kamarulzaman Hassan, EPF would like to add retail hypermarket chain to its stable.
It is prudent and logical for EPF to seek opportunities in mature markets because although it knows the home market well, it is already in every sub-segment of the local real estate market - logistics, retail, office, residential.
As Kamarulzaman aptly said, EPF is “a big fish in a small crowded pond.” Other big fish in this small pond include Permodalan Nasional Bhd, Retirement Fund Inc (or KWAP) and Lembaga Tabung Haji, Perbadanan Hartanah Bumiputra among others.
There are several reasons why EPF has made forays abroad. It was badly hit in 1997 and 2008. Prior to this, it invested only in Malaysia. It had all its eggs in one basket.
Earlier this year, as the ringgit was weakening, certain parties in the government called on the various funds to bring their money home to shore up the ringgit. They were to curb investments abroad.
EPF subsequently sold 1 Sheldon Square, UK for £210mil (RM1.14bil), which it bought in 2010 for £156.7mi, giving EPF a net gain of £54 mil. Whether it made that decision to sell based on that call to bring the money home is a moot point. That property was tenanted out to Visa Services Europe until December 2022, with a 5.75% annual yield.
So far, KWAP and Felda have said they will not be selling their investments which gave them a good yield.
The thing is, if there is better yield to be had, and forex to earn, why dispose of them?
And why curb funds from investing abroad if they have done proper due diligence and are able to manage these investments well.
As it is, according to Kamarulzaman, London properties are so hot today that investors are willing to get 3.5% to 4% in annual yield.
Selling overseas real estate which were purchased when the pound was low, when it is offering a good yield, just to shore up the ringgit does not seem to be a wise call.
It is like killing the goose that lays the golden egg just to provide food for a day. Yes, London’s property prices are frothy now, but these property investment have long leases.
Besides, the markets it has invested in are mature markets with high liquidity. There is interest in these markets from around the world.
Because property sector is cyclical, the timing is important. EPF entered UK when the it was about RM5 to a pound. These investments came with long leases, which fit into EPF’s need for a steady income flow as it needs to pay dividends to contributors.
In short, going abroad gave it a much needed new investment platform which was not available at home.
These mature markets offer transparent legal and tax structures and clearly, governance was well established.
There is a clear exit option and this was demonstrated when it sold 1 Sheldon Square earlier this year.
UK properties have gone up in value considerably since. Whether EPF will continue to liquidate depends on various factors but to liquidate just to bring home the money to shore up the ringgit should not be one of them, especially when its investments are yielding good returns.
Property is today the biggest alternative asset class for institutional investors and forms the largest allocation for pension funds, insurance companies and sovereign wealth funds.
It is also not homogenous but in today’s volatile environment, it is more tangible than most other asset classes.
Comment by Thean Lee Cheng The Star/Asia News Network
In its latest Global Cities 2015 report, real estate firm Knight Frank has highlighted five technologies that will likely change the property sector.
It is remarkable to think that just five years ago no one owned an iPad (launched in April 2010), illustrating how quickly new technology becomes taken for granted today.
This is an example of a technological advance that has accelerated changes in how we work, shop and spend leisure time, with implications for commercial real estate. Some, who previously shopped regularly for books, CDs, DVDs, and video games, now access all these products through their tablet computer.
This has contributed to a reshaping of retail property, and sparked a wave of office-based start-ups that produce apps. Similarly, the popularity of e-shopping has buoyed demand for warehouses. New technology undoubtedly impacts the property market, raising the question, where will change come from next.
Office robots
Development has begun on telepresence robots, whereby a remote worker can log into a droid, traverse the office, see what is occurring, and speak to colleagues. Cleaning robots at home have already taken off. An office service robot that cleans, reloads printers, and performs basic security duties, could be a future extension of this technology. Future office buildings may need storage, recharge and service areas for these droids.
The internet of things
This is where everyday appliances are connected to the internet, so they can be controlled remotely or intelligently monitor how we use the device. For instance, a fridge could monitor its contents, and send the homeowner a suggested shopping list to his mobile phone with a ‘buy’ button. This would add momentum to the rise of e-retail, increasing demand for logistics property. Internet-linked machinery could also result in smart office buildings that partially manage themselves.
Drones
When Amazon rolled out plans to deliver small goods by drone helicopters there was initially a sceptical reaction. However, other firms quickly announced they too were testing drone delivery. In the future, logistics properties may come to resemble mini-airports, as drones come and go. EasyJet, the airline, has plans for its maintenance crews to use drones for aircraft inspection. Similarly, the property industry could use drones to inspect buildings.
Driverless car
A computer driven car, using wi-fi to communicate with other vehicles and receive traffic reports, should improve traffic flow and speed up commuting. The result will be a better quality of life in office districts, as efficient traffic movement allows more streets to be pedestrianized, improving public areas and passing trade for retailers. The city will become a more pleasurable experience encouraging people to work, live and shop there.
3-D Printing
3-D printers are being used more often for producing components, but those parts then need to be assembled into a working product, which will require quality control testing. This requires a factory. However, in R&D and specialist manufacturing, 3-D printing is having an impact, bringing down costs on short production runs. Consequently, we could see a wave of ‘start-up’ manufacturers offering bespoke or specialist goods, generating more demand for light industrial units.
