Crowd Realty recently received seed funding from a company managed by Tokyo-based VC firm Global Brain Corp
The crowdfunding concept is deepening its way into Asia’s real estate market. Meet Tokyo-based Crowd Realty, a P2P (peer-to-peer) platform for real estate.
Crowd Realty takes the idea of crowdfunding and applies it to property and opening real estate to the masses. Individuals can invest in real estate projects that were previously open only to large institutions or people with fat accounts. Think of the ability to invest in a major piece of property and reap the benefits without the hassle of managing the property or collecting rent.
For an explanation on the overall property crowdfunding scene in Asia, read e27’s previous coverage on main player InvestaCrowd, whose founder is based in Singapore. Another major player in Asia is CoAssets, a crowdfunding site that lists properties around the world.
Crowd Realty plans to use the seed funding to build the crowdfunding platform that will allow investors to pool and leverage real estate opportunities that were previously unavailable, creating a level playing field in the real estate investment marketplace. Investors can explore mid-to-long term funding schemes through direct investments, including the renovation and revitalisation of certain properties in Japan.
Crowd Realty was founded by Takeshi Kito, who has a background in engineering and architecture and was previously working in investment banking.
e27 chatted with Kito to ask him about his insights on crowdfunding for real estate in Japan and Asia at large.
Here are the edited excerpts:
Is there a minimum that investors need to spend? Are you planning on attracting investors overseas?
In general, real estate crowdfunding platforms charge investors a [base] fee and management fee. My platform doesn’t charge a [base] fee, at least in the initial stage. Investors just pay an annual management fee of 1-2 per cent during their investment period.
When we launch a secondary market, a fee will be also charged on a single transaction. We hope that using the blockchain system will minimise this fee. We plan to attract both Japanese and international investors.
How can you use blockchain technology?
We currently don’t have a secondary market system that would enable investors to trade equity interests between individuals in our early stage, but we will implement this in the future. We plan on using blockchain technology, so we can deal in each project’s equity using digital currency, which would reduce system and operational costs drastically.
How would you compare the landscape for property crowdfunding in Japan versus Singapore and Hong Kong?
In Japan, the P2P lending business is prohibited. Any person or company which lends money in Japan must register under the Money Lending Business Act, which prevents P2P lending operators to offer a platform where personal investors lend money directly to the borrowers.
In Singapore, the P2P lending business is also prohibited. Money lending in the country is regulated by the Monetary Authority of Singapore and the Ministry of Law, as well as the Moneylenders Act, preventing unlicensed individuals from exploiting borrowers in need
In China and Hong Kong, the P2P lending business is a grey zone, unregulated through lack of definition. From an investor’s perspective, yield gaps between Real Estate Investment Trust (REIT) and 10 years government bond of each market are almost the same level (around 3 per cent).
I think there are similar opportunities in Singapore and Hong Kong to secure properties using a crowdfunding scheme.
Kito cites the following figures and comparisons with government bonds:
In Japan, J-REIT dividends yield 3.4 per cent; 10 years government bond yields 0.4 per cent.
In Hong Kong, HK-REIT dividends yield 4.9 per cent; 10 years government bond yields 1.6 per cent.
In Singapore, S-REIT dividends yield 5.6 per cent; 10 years government bond yields 2.5 per cent. (can be at the end of the interview)
Is there any insurance to account for natural disasters in Japan?
Yes, we will pay money for fire and earthquake insurance to protect assets from natural disasters.
There is a big age gap in Japan. Old people have more savings than the young. Do you see this as an opportunity for the younger generation to increase their savings yield?
In general, Japanese own over 50 per cent of assets in cash/savings. And currently savings yield in Japan is almost at 0 per cent. I want to try to have the younger [generation], release these savings and to invest in risk assets to rebalance their future cash flow.
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