Tagged: Block Purchase with BG
October 12, 2017 at 4:37 pm #3234
this is a new topicApril 3, 2018 at 12:26 am #3431
Im Shahrul. I would like to know if there are markets in the Asia Pacific that accepts block buying of Properties using a Bank Guarantee as a method of Payment. The BG has a maturity of 1 year. The Block Purchase is generally from a single developer or property owner.
If such a system is possible I would like to know regulatory requirement for resale to end buyers. The group Im with hope to resell the properties at an affordable price to potential buyers. It is hoped that this method will allow more buyers to qualify for end financing or alternatively if the numbers is sufficient we could arrange for end financing through our sources but must comply to all the regulatory requirements of the asociated country or jurisdiction.
ShahrulApril 3, 2018 at 8:37 am #3436
What’s your country of residence and what kind of properties do you plan to buy?
I’m not an expert on this subject, but guess an important question will be which bank gave you the Bank Guarantee and whether that bank is incorporated in the country where you plan to buy property.
Regarding the resale of the properties in the particular block, as you’ll be the owner of the units once you managed to buy them, I assume you have the right to sell the units to other buyers. But this is just my guess. Just keep in mind that there are limitations to the amount of properties foreigners can own in some countries, you’ll find such limitiations in China and for established properties in Australia for example.April 4, 2018 at 12:48 am #3437
Thank you for your advise. We are Malaysian but we believe the financial model we are working with is applicable across any country as long as the country allows foreigners to buy roperties in that country. In Malaysia for instance foreigners can buy only strata title properties worth more than RM 2 million. Any way the jurisdictional constraints can be overcome by establishing a local joint venture entities in the country of interest.
The instruments we are using are generally issued by A rated International Banks so the transaction is not jurisdiction constraint. I believe all the countries in your area of interest would be able to accept the guarantee. The issue is finding the right developers willing to accept such a methodology. Technically the guarantee matures in 1 year but the guarantee allows the developers to negotiate with his bank and receive a large portion of the sale from the guarantee as collateral. And we also need to work closely with the developer to acess his client base to enable us to sell the house faster so as not to incur holding cost.
The buyers has to deposit 30% of the cost of the house. This I believe is common practise in Indonesia, Australia and New Zealand. We plan to sell the properties 20% to 30% below market price to make the properties affordable to potential buyers.
In doing so we can enlarge the customer base for a particular market segment because he now applying for end financing for only 40% of the cost of the house. If the banks we are working with has operations in that particular country we can also organise end financing for the client.
I have started communicating with a small developer in New Zealand because they are facing acute “affordable” housing shortage. I would like to explore Indonesia, Philippines, Vietnam and Thailand.
Before we go into a country we need to study the country’s financial services act because funds flow into and also out of that country. Malaysia has a very tight financial regime. Thailand and Indonesia is a bit more open. We also need to study the taxation regulations. In New Zealand the government considers the price differential between the market price and our selling price as being an investment gain for the buyer and as such it is taxable. So we incorporate this tax is the final selling price so that we can off-load the tax burden from the buyer.
Thank you. Have a nice day.
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