Date
11 December 2017
A crowdfunding website lets ordinary investors own luxury properties but it's wise to examine if the offer is as good as it sounds. Photo: huanqiu.com
A crowdfunding website lets ordinary investors own luxury properties but it's wise to examine if the offer is as good as it sounds. Photo: huanqiu.com

Crowdfunding property projects: Too good to be true?

Invest 1,000 yuan (US$163) and own a luxury property — and profit from it as well.

That is the pitch from a website that specializes in peer-to-peer (P2P) lending and now has ventured into crowdfunding.

But before people start jumping up and down over this tantalizing proposition, they’d be wise to examine if the offer is as good as it sounds.

P2P lending site Tuantai.com claims it has received a warm response from investors since it launched a crowdfunding website that enables ordinary investors to own luxury properties. 

Tuantai rolled out China’s first property crowdfunding project in June for a luxury villa in Dongguan developed by Citic South, a subsidiary of Citic Group, according to financial magazine Investment & Finance.

It invited individual investors to pool money to buy it. Finally, 433 investors bought the property for 14.91 million yuan.

Tuantai then started to look for buyers on behalf of the investors after getting a third party to manage the property as a trustee.

The villa was ultimately sold for 16 million yuan, a 7 percent return in a couple of months. The second project achieved a gain of more than 20 percent.

Ideally, such crowdfunding investment allows small investors to ride a bullish property trend while providing liquidity to developers.

But it may not always work as nicely.

Unlike having stocks, ownership of a crowdfunding project is far from clear-cut from a legal perspective due to its complicated structure.

If property prices fall, investors will have a hard time digging themselves out of an illiquid asset.

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RA

EJ Insight writer

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