Crowdfunding: A new way to invest in Asia property

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Crowdfunding, which came to fame as a way for start-ups or individuals with quirky ideas to raise cash, is going mainstream, with Singapore-based real estate crowdfunder CoAssets joining Australia's junior market to bring its alternative investment model to a bigger audience.

CoAssets aims to "match-make" property deals - be it mezzanine loans to developers or equity in physical property - with investors. On Wednesday the company, which is the first crowdfunding platform for real estate projects in Southeast Asia , started trading on the National Stock Exchange of Australia (NSX) under the symbol "CAX".

While the idea of real estate crowdfunding has taken off in the U.S. and U.K. with the success of companies such as RealCrowd and FundRise, it remains a relatively foreign concept in Asia.

CoAssets' co-founder and CEO Getty Goh told CNBC he was aware that wary developers preferred traditional funding sources like bank loans, while some investors were concerned about the risks related to the new investment tool.

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"There were several considerations, but fundamentally, we were going for credibility," Getty Goh, the co-founder and chief executive officer of CoAssets, said of the decision to list.

"In light of the property scams, we recognize that there is a lot of apprehension when it comes to crowdfunding so we want to get it right by getting ourselves listed and show that we are credible."

Since its launch in 2013, CoAssets has crowdfunded more than $36 million Singapore dollars ($26 million) for over 15 residential and commercial projects in Asia, with an average return of 6-17 percent. Investors keen to invest can commit as little as 1,000 Singapore dollars or more to be part of a minor shareholder cohort coordinated by CoAssets.

Prior to the listing, the financial accounts of the crowdfunding platform were audited twice by third-party auditors in Singapore and Australia.

"All in all, we are subjecting ourselves to a high level of scrutiny so as to impress the market and stakeholders that we are taking this business seriously not just in Singapore but also in the region," Goh told CNBC by phone.

Getty Goh, co-founder and chief executive officer of Singapore-based crowdfunding platform CoAssets.
CoAssets
Getty Goh, co-founder and chief executive officer of Singapore-based crowdfunding platform CoAssets.

Expansion plans

Singapore-based CoAssets is also betting on its listing to take it beyond its home market as property crowdfunding embarks on an "upward trend" amid growing receptivity from developers, investors and governments in this part of the world, according to Goh.

"Even though Singapore is transparent, the market size is relatively smaller so for crowdfunding to take off, we need to look beyond Singapore... Hence, we want to kill two birds with one stone this time round in Australia: To list and engage Australian investors in a better position," he said.

The crowdfunding platform will focus on developing its presence in Australia throughout 2015 as it believes the country is a fertile ground for internet-based companies, compared to neighbouring countries.

But with a better market comes stiffer competition. Since 2014, Australia has seen a number of start-ups that apply crowdfunding technology to real estate assets such as Perth-based CrowdfundUp and BrickX.

However, Goh is confident that CoAssets has the winning edge: " We've been up and running for the past 2 years and have raised more than $36 million for our crowdfunding deals, but our competitors are still mostly in the start-up phase. We are at a different stage of growth now."

The co-founder also told CNBC the start-up was eyeing a move of its listing from the secondary board to the main Australian Securities Exchange (ASX) by late 2016.

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Apart from Australia, CoAssets has its sights set on two other Southeast Asian countries: Malaysia and Indonesia. In the former, the start-up has plans to operate an equity crowdfunding (ECF) platform after Malaysia became the first country in Asia-Pacific to legislate ECF following its approval of six operators last month.

"We are optimistic on Australia and Asia [because] without a doubt, this model works in this region. Our next project is to harmonize these markets in light of the ASEAN integration, which is exciting," said Goh, referring to the establishment of the ASEAN Economic Community (AEC) by the end of 2015.

Contrary to expectations, an expansion into China is not on the cards for CoAssets even as P2P lending gains traction among the country's cash-strapped property sector.

For one, Beijing-based Modern Property raised more than 40 million yuan ($6.45 million) this year from four crowdfunding campaigns, according to a report by Reuters.

"While China presents exciting opportunities, our inherent advantage is here at home and we want to dovetail with the ASEAN integration initiative," Goh told CNBC. "Why venture into a truly foreign market when you have exciting opportunities closer to home?"