A new property crowdfunding platform called FundPlaces will launch in Singapore later this month joining two existing players – CoAssets and DomaCom, revealed media reports.
In a nutshell, property crowdfunding is the practice of sourcing capital needed to start a real estate development from a large group of people, usually via the Internet, while crowdfunding platforms help to connect investors with those developers who need cash.
Although these platforms provide smaller developers with a quick and efficient alternative source of capital, many home builders here still prefer the traditional means of raising funds like issuing notes, taking bank loans, or listing on a stock exchange.
One key concern over crowdfunding platforms are the vague rules as the Monetary Authority of Singapore (MAS) has yet to issue a clear framework governing the practice.
Another issue is the high risks, like failure of a development due to a company’s negligence, investors not being able to encash their securities and non-fulfilment of the promised returns.
Nevertheless, crowdfunding platforms in Singapore vigilantly perform various checks to ensure that a developer fulfils its pledge to investors.
For instance, FundPlaces requires developers to provide the necessary documents for inspection by prospective investors, while DomaCom makes sure that a property fund is registered with MAS, or by Australia’s ASIC. For CoAssets, the developer must have an office in Singapore and a local director who would be held liable in case of a default.
“For most projects, we can’t guarantee they won’t fail,” said FundPlaces co-founder Tan Kok Keong.
“That is a risk that all investors have to take. But we try to mitigate that risk by working with people who have shown themselves to be good paymasters, who are proper business people and have credible backgrounds,” he added.