This article first appeared in Digital Edge, The Edge Malaysia Weekly on May 13, 2024 - May 19, 2024

A troubling trend in Malaysia’s housing ownership landscape has emerged in recent times. The declining rate of home ownership is juxtaposed against a surge in unsold properties, painting a complex picture of the housing market.

This scenario can be particularly daunting for prospective investors as they grapple with soaring property prices, economic unpredictability and cautionary tales of investment pitfalls. For buyers, these circumstances create the perception that real estate ventures are inaccessible and overwhelming, particularly those in the low- and medium-income brackets.

One of the main obstacles encountered by inexperienced consumers is the difficulty in navigating the complexities of real estate transactions. Understanding mortgage options, assessing property values and deciphering legal documentation are crucial yet intricate tasks that require guidance and expertise.

Additionally, the stigma of failed investments looms large, often dissuading individuals from pursuing property investments, perpetuating a cycle of hesitancy and missed opportunities. This is where real estate investment company FAR Capital comes in.

Its founder and CEO Faizul Ridzuan says three main issues are contributing to the property overhang and low homeownership rate in the country.

First, property developers aren’t using data to guide them on the kind of products to build and how to price them accurately, he points out. “This results in an annual overhang of over 25,000 units since 2016 as there is a mismatch between what is being sold and affordability.”

The lack of financial knowledge among most Malaysians is another challenge. “Most adults must figure this out on their own and don’t fully understand the impact of making bad financial decisions such as buying a car first, taking a personal loan to finance a lifestyle or becoming a guarantor. By the time they want to own a property, they can’t, as their commitments are already high. This results in the mortgage approval rate being below 45% on average, a high unbankable population and high household debt,” he adds.

Third, developers must meet bumiputera quota requirements but are not able to fulfil them, as most property developers aren’t bumiputera and don’t understand the needs of the community, says Faizul. “As a result, non-bumiputera property buyers are always the ones who end up footing the bill and paying higher prices.”

With the right data sets, property developers will be able to make better decisions, such as what products to build and what prices to sell at to match the area’s income and affordability levels so that they can sell 80% of the total units within the first 12 months of launch, he says.

FAR Capital guides property developers in launching products that buyers — both bumiputera and non-bumiputera — want to buy and can afford, as well as meet the 80% sales status within 12 months of launch to avoid negative cash flow, which could result in major delays or worse, abandoned projects.

The company was founded quite by accident, says Faizul, who rose to fame in 2014 as an industry specialist through the publication of his book, WTF: 23 Properties Before 30. The book simplified the principles of property investment in Malaysia, drawing on his own experiences.

It eventually led to followers asking Faizul for help in purchasing their properties, all willing to pay his fee. Founded in 2014 solely due to public demand, the property agency recognises the growing potential for property acquisition among those who require expert guidance to navigate complex processes.

But the Covid-19 pandemic nearly killed FAR Capital before it could fully get off the ground. Steadfast in his decision to keep the company running, Faizul held free online seminars that provided expert guidance and support in property acquisition.

“This strategic initiative yielded a substantial increase in our client base, marking our evolution from a traditional brick-and-mortar bulk purchase company to the region’s first and only profitable fintech and proptech firm,” he says.

Today, FAR Capital serves more than 28,000 clients, with property sales exceeding RM1 billion. “Our job as of today is to try and make the industries equal for both buyers and developers,” says Faizul.

FAR Capital serves two distinct client bases: consumers and property developers. On the property developer side, it leverages data to ensure accurate pricing that matches real affordability, enabling developers to achieve rapid, high-volume sales that meet their annual financial objectives. This approach emphasises strategic alignment between consumer affordability and property market dynamics.

For consumers, its focus is on enhancing cash flow to increase disposable income, primarily through property ownership for wealth creation and financial transformation. It assists consumers in improving their monthly cash flow through comprehensive financial education and valuable insights that transform clients from unbankable to bankable within 12 months. It also facilitates access to relevant financial tools and property deals aligned with their clients’ financial goals.

FAR Capital’s learning management system (LMS) portal empowers clients to customise their learning journey by accessing a wide array of topics such as commitment reduction, income enhancement strategies and guidance on property selection. This tech-driven approach differs significantly from traditional real estate firms by providing clients with personalised educational resources and tools to make informed decisions, ultimately enhancing their financial capabilities and property investment acumen.

“The system we are using allows us to track clients’ learning progress, understand their current standing, identify topics of interest and determine the kind of property inventory we need to consider bringing in next,” Faizul explains.

FAR Capital also employs Matchbank, an online application that assesses creditworthiness and loan eligibility. The results of the financial screening are then reviewed by FAR Capital’s success managers — who are registered financial planners. Following one-on-one consultations, the team will then explore properties that match their clients’ financial objectives.

“In the event that clients aren’t bankable today, Matchbank will provide an automated guide on the steps they can take to improve their financial position and predict how long it will take them to become bankable,” he says.

FAR Capital’s educational resources are accessible through subscriptions. Fees ranging from RM1,000 to RM6,000 are chargeable once every three years, and customers’ subscription requirements will depend on whether they require property for personal ownership or investment.

Subscriptions provide access to 20 weekly online classes. Additionally, customers can meet the company’s consultants one on one. They can “subscribe to post-management services, where on top of being able to buy property cheaper, we also help with renovations if required. For those looking to rent out their properties, we do property management. We also have a co-living arm called Wetopia, which is currently the largest co-living brand in Singapore and Malaysia,” says Faizul.

Bulk purchasing property from developers is old hat, but unlike other agencies, what sets FAR Capital apart from others in the industry is that it doesn’t consider itself a property agency. And while the majority of its highly diverse clientele come in “ready to buy”, the company still aims to keep affordability as its key draw.

It is easy to do this when there is volume and money, says Faizul. Developers typically approach FAR Capital directly since the agency is already the country’s largest, with clients who are ready to buy based on its existing data.

“For example, if today, we’re taking an inventory worth half a million ringgit, I know exactly who my clients are who can afford to take a RM500,000 loan to buy the property,” says Faizul.

“The key difference is that we’re a proptech company, and the goal is to reduce wasteful buying. We use data as the core of our business. We know our clients inside out, their goals, what kind of loans they can get. So before we take on inventory, we already know who is going to buy it, which is why we can move 50 units in one night.

“We can predict sales quite accurately or how well we’re going to do if we take on a project. We can also predict how good the sales are going to be for property that is newly launched.”

FAR Capital’s profitability stems solely from its property-purchasing arm. This often sparks curiosity about how it ensures the integrity of its inventory, particularly since it underwrites properties directly from developers.

“The goal is to clear [what has been purchased], which is why the data point must be very accurate,” stresses Faizul. Despite that, about 2% of the company’s purchased inventory can go unsold.

The solution? “We sell it at our purchase price, which is already quite low. It’s just that we couldn’t complete it within the six months contract. But we could have done this in nine months, for example.”

Before committing to any type of inventory, FAR Capital’s approach ensures that it has a substantial pool of prospects — five times the number of prospects, to be precise — within its network who are ready to take up the inventory. Furthermore, the company’s extensive network provides it with leverage, enabling it to negotiate favourable deals.

“Simply put, we have the largest [in terms of bulk purchases] and we have a good reputation for delivering the numbers,” says Faizul.

FAR Capital also does bulk deals on unsold inventories, and to date, “all property developments that we partake in have seen an above-average increase in property values and rental values within a 36-month period”, he adds.

FAR Capital has ambitious plans for its continued growth and impact. In the next 24 to 60 months, the company aims to “continue to use technology to help improve cash flow for individuals and families, positively impacting five million families in the region, uplifting [financially] as many people and families as possible, especially those from B40 and M40 families,” says Faizul.

Its goals include, but aren’t limited to, becoming the first profitable public-listed company in the fintech and proptech sectors in Asean. It aims to provide a secure platform for property developers to test new launches, leveraging data to guide them in offering more affordable properties to buyers.

Additionally, FAR Capital seeks to establish a platform where property buyers can invest in projects that are less likely to face delays or abandonment, thus aiding banks in reducing non-performing loans. Ultimately though, its main vision is to demonstrate that Malaysian companies and start-ups can evolve into regional champions like Petroliam Nasional Bhd (Petronas), AirAsia, CIMB Group Holdings or Malayan Banking Bhd (Maybank), setting a new standard for success and innovation in the region.

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