Securities Commission Malaysia releases property crowdfunding framework to assist first time homebuyers

The rising costs of living in Malaysia are making it difficult for those looking into purchasing their very first home. In accordance with an initiative announced in Budget 2019, the government is looking for ways to provide an alternative financing solution for first-time homebuyers.

The Securities Commission Malaysia (SC) announced on 17th May 2019, eight new recognized market operators which comprise of three equity crowdfunding (ECF) and five peer-to-peer (P2P) financing platforms.

These platforms received their letters of registration from the SC chairman Syed Zaid Albar, in the presence of the Minister of Finance, Lim Guan Eng, before the start of the Fintech Roundtable organised by the SC.

The roundtable discussed the progress of the fintech industry in developing digital innovations to meet the financing needs of small and medium enterprises (SMEs) and to enable greater financial inclusion for both Malaysian issuers and investors.

‘‘The SC will continue to facilitate the development of innovative digital solutions which democratise access to investments while broadening financing options available for all Malaysians,” said Syed Zaid.

The new ECF and P2P financing platforms will begin their operations by the end of this year.

Property crowdfunding offers the same potential as that of ECF and P2P financing platforms in providing an alternative source of financing particularly targeted to first-time homebuyers. It can also offer investors access to a whole new investment opportunity.

The ‘Guidelines on Recognized Markets’ has been released after revisions have been made to ensure the fairness of the scheme and also to protect investors’ interest. The guidelines list out the requirements and obligations of a property crowdfunding platform operator.

These include minimum shareholders’ funds of RM10 million, an obligation to provide fair, clear and timely information to both homebuyers and investors prior to participating in the crowdfunding campaign, plus exit certainty at the end of the agreed tenor.

The scheme is open to Malaysian citizens aged 21 and above who have not owned a property before, whether individually or jointly. The type of property has also been strictly defined and must be independently valued to be worth RM500, 000 or below.

The homebuyer is also not allowed to sell or transfer the property during the scheme’s tenor and must stay in the property during the period of the tenor, which is set by the crowdfunding scheme.

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