Are you even a desi if you’re not obsessed with owning land? The interest in real estate is in our genes. Our history of colonization and the still running feudal system has processed us into believing that owning land is owning power. We work all our lives with the end goal of “apna ghar, apni zameen”.
Real estate has the highest appreciation value in Pakistan thus investing in real estate is always a risk-free profitable investment. Premium real estate in Pakistan however, is far beyond the reach of 99% of the population.
The only way to make investment culture inclusive for all classes is to provide opportunities for small investments. One such solution is crowdfunding. A concept completely alien to the Pakistani population.
2021- The year of the startup boom. The year brought many successful startups but less unique ones. A high success rate in digitalizing retail was followed by a large number of delivery services startups. There were ground-breaking investments in fin-tech, ed-tech, online booking and delivery startups.
In midst of all this, there was one startup that tackled the problem of money parking in real estate and the middle class never being able to afford to buy land. Xstate initiated equity crowdfunding in Pakistan in January 2021. It fractionalizes real estate property and lets investors buy small shares for as low as PKR 5000.
How Xstate works?
Xstate basically buys the property and fractionalizes it into smaller affordable parcels. Investors can now buy small portions of this property for as low as PKR 5000. The number of tokens and the holding time for the property is publicly preannounced. When the property is sold, every investor gets their share of the profit.
“We want to make real estate investments accessible for everyone no matter where they are and what their budget is. Using the concept of tokenization, we are able to do just that, providing the opportunity of fractional investments like cryptocurrencies while providing historically consistent high returns of the real estate industry.”
— Asif Khan, Co-founder Xstate
Investors can trade in their respective shares, buying more of the same property or selling this to get a larger share of another one. This property trading avoids parked revenues and keeps the money regulated.
What sets Xstate apart from its competitors?
- Xstate has an emphasis on safe and shariah-compliant investments. Properties listed on their platform are completely owned by them. There is no third party involved between xstate and the investor during the whole duration of the project.
- Xstate picks a prime property that is secure from all aspects and also has a great appreciation margin for the future.
- It is an entirely transparent and scalable model that can be accessed everywhere.
- It offers a simple user interface and an investment method. Thus their investor pool has tonnes of diversity in occupation, age, gender and other demographical factors.
Xstate shows Promising Prospects
Xstate has the potential to solve Pakistan’s economic problems by making real estate investments liquid and accessible.
The middle class has been deprived of financial inclusion because of their financial conditions never letting them invest. Xstate provides good avenues to save and invest for the middle class. Many women also made purchases through their platform and this highlights the financial inclusivity of the idea.
It offers overseas Pakistanis to invest from the comfort of their homes. Xstate is a completely online platform that provides secure real estate investment opportunities for all.
Does that mean “ab zameen hogi sab ki”? Well, not so soon.
Public notice by SECP
The Securities and Exchange Commission of Pakistan (SECP) issued a public notice on 17th December 2021 warning the general public to refrain from investing in any fraudulent investment schemes by Xstate Technologies (Private) Ltd Company and a few others via their online platforms.
Any company working around equity crowdfunding is not illegal since Pakistan, as of now, has no policies covering this domain. Fractional investment and crowdfunding are tricky businesses since charity-based crowdfunding is banned in Pakistan. Thus SECP’s concern and assistance would help build the general public’s trust in legally operating companies.
Xstate claimed they were not contacted regarding any concerns before the public press release.
“We welcome the opportunity to engage with SECP’s representatives to explain our business model and activities. We are confident that, given the opportunity to do so, we would assuage any concerns they have around Xstate.”
— Xstate’s response to SECP’s notice
Legal Aspects of Xstate
Xstate is legally registered at SECP and FBR. It works on the business model of Equity Crowdfunding which currently has no regulations from any regulatory body of Pakistan.
Xstate affirms its engagement in extensive due diligence with leading legal experts in the country and claims receiving assurances that operating in this sector would not be in breach of any existing regulations.
Similar platforms worldwide
Equity crowdfunding is a business model that has seen to be of great success in many countries in the past few years. The companies run legally with the approval of their regulatory bodies and the backing of their government.
BrickX
BrickX is an award-winning platform operating in Australia that provides a simple and low-cost way to access the property market. They divide each property into 10,000 shares (that they call bricks).
It offers automated investments with a set monthly deposit by the user which can be cancelled, changed or transferred to manage your own investment at any time. Additionally, it also offers investments for minors with the details of an adult trustee.
Property Planner
PropertyPlanner of UK, lets the customers buy their share in professionally managed properties across the UK. You can select your own preferred property or build a portfolio to suit your own criteria and easily diversify across different types of property assets.
It offers both newly listed properties and resale ones. It regulates the share quantity according to the number of investors. It lets sellers of property bid the initial amount. The valuation of the property is analyzed by an independent chartered surveyor every 3 months.
Smart Crowd
SmartCrowd, a startup operating in UAE, lets customers invest in prime Dubai rental properties for as low as AED 500 with MENA’s(Middle East North Africa) first and largest real estate crowdfunding platform.
It takes every aspirant through an educational process by explaining all the business models, features and how their system works. It lets the investor track the performance of their investments using an interactive dashboard. It also lets you diversify your investments across multiple properties to reduce risk through an entirely digital and hassle-free process.
But above all, SmartCrowd is regulated by the Dubai Financial Services Authority, giving it room to grow without restrictions.
LoftyAI
Similarly, LoftyAI, an American startup, claims it has made investing in real estate even easier than investing in stocks. The platform lets you diversify into real estate investing in less than 5 minutes for only $50.
It goes by a simple 4 step process :
- View property
- Purchase token
- Receive token in your Algorand wallet
- Hold tokens and receive rental income
Why not Pakistan?
Xstate left us dreaming for a day when the people constructing a building could actually collectively own the building. We had our hopes high for this startup enabling us to start investments for real estate with minimum savings.
Why is it that when a trend goes viral, succeeds in various countries, makes ground-breaking investments, it is only years after, that a similar operation starts in Pakistan?
We have been lagging behind almost 6 years in technology from our neighbouring countries. It is because of our un-friendly policies and fixed regulations that take ages to alter.
It is high time Government and regulatory bodies research the legal aspects of new businesses and introduce friendly regulations. All crowdfunding startups operating in other countries are facilitated by their policymakers.
In order to upgrade our economy, our regulatory bodies must be in-line with the new-age models and businesses. Regulations are meant to channelize the businesses in the favour of the country instead of creating hurdles.
“I am hugely bullish on fractional ownership in real estate,Wheels [are in] motion to set regulations.”
— Habibullah Khan, a strategy and branding advisor for early-stage companies.
Collective efforts of Xstate and SECP would bring financial freedom and financial inclusion in the real estate sector like never before.
