Remember when you were younger and you made that little sketch in your drawing book imagining what your first home would look like? And now that you're all grown up, are you a proud houseowner or a struggling millennial who can't seem to afford a house despite working very hard and laying off on the avocados?
If you got the avocado reference, you’ll likely also be familiar with the concept of crowdfunding – where entrepreneurs with big dreams but small dollars attempt to get their seed funds from the public via sites like Kickstarter, GoFundMe, or IndieGogo. So, if someone can successfully get funded to make a potato salad, you might be wondering if you could get crowdfunding for…..your dream home?
Well, it seems that someone in the Malaysian government had a similar idea (for houses, not the potato salad).
It is known for a fact that one of the biggest housing problem in Malaysia is not availability, but affordability, which is why the, during the tabling of Budget 2019 in November, the federal government announced that it will introduce a "property crowdfunding" platform to help Malaysians buying their first homes. This initiative, said to be the first of its kind in the world, is dubbed as FundMyHome and was launched by PM Tun Mahathir in November 2018.
Before you get too excited, it’s important to note that FundMyHome is very much at its initial stage, and this article will only cover basic information that’s currently available to help you understand the scheme (while the writer attempts to understand it herself) in its current form.
What is FundMyHome?
FundMyHome is basically a platform that allows you to "buy" your first home which you can occupy for 5 years with a one-time payment of 20% of the purchase price while the remaining 80% will be contributed by an investor (or investors).
So, if you are seriously thinking about owning a home, you can choose a house from a list of participating homes on their site, buy a home for only 20% of the purchase price and legally own the home for the next 5 years. The 20% can be financed through regular means such as a bank loan, your savings, or withdrawals from your EPF account.
In a nutshell, the scheme allows investors to assist Malaysians in owning a house, and is aimed at allowing first-time homebuyers to fully utilise a property for 5 years without having to worry about rent or loan repayments.
But… what happens after 5 years?
You might be wondering why investors would put their money into helping you buy a house (other than the goodness of their hearts, possibly), and this part will answer that question.
As mentioned in the earlier point, once you have paid the 20% of the purchase price, you will become the legal owner of that house for 5 years. Once the 5 year period has lapsed, you can either choose to sell the house, keep it, or rollover on the FundMyHome scheme for another 5 years!
Since property prices usually go up with time, you will get the 20% of the increase in value if you choose to sell the house. On the other hand, if you plan on staying in the house after 5 years, you may need to top up that initial 20% value to match the new price of the house.
As for the investors, they have three options:
- Stay on as an investor
- Sell their 80% share to other investors or institutions
- Sell their 80% share back to you (the homebuyer)
So in theory, it should be a win-win situation for everyone involved.
But how will it protect homebuyers?
Currently, the FundMyHome scheme does not come under any regulations yet. However, since the property crowdfunding scheme is expected to come into effect by the first quarter of 2019, the Securities Commission (SC) will be reviewing the details of the proposed structure for the property crowdfunding platforms and lay down a set of requirements that such alternative homeownership schemes should fulfill.
We will update this article when that happens. In the meantime, iMoney has covered the financial part in greater detail, and you can also look at FundMyHome’s site for more information (and available properties).