Adeus, EcoHouse!

By The Folks @PropTalk - January 9, 2015 No Comments

EcoHose Developments Limited, the Brazilian social-housing development that amassed up to $65.55 million from Singapore investors and then left them largely unpaid, has met its demise.

Come Jan 15, creditors will meet at the Talbot Hotel in the UK for updates from EcoHouse's directors on the company's statement of affairs, and then appoint a liquidator to wind up the company and distribute its assets appropriately.

The news follows the move by the Monetary Authority of Singapore to put the Brazilian property developer on its investor Alert List last July, after having received several complaints from unpaid investors.

The company had begun seeking investments from Singapore in September 2011 to fund property developments in Natal in Brazil, under the Brazilian government's Minha Casa, Minha Vida (My House, My Life) social housing project.

EcoHouse offered Singapore investors three property developments in which to park their money: Arco Iris, Casa Nova and Bosque.

For a minimum investment of GBP23,000 ($46,408) per housing unit, EcoHouse offered a fixed rate of return of up to 20% for a 12-month contract.

Things went well at first. EcoHouse announced the completion of its first project, Arco Iris, and investors were paid.

Then problems cropped up in November 2013, when the company delayed the Casa Nova and Bosque projects, and offered investors a deed of modification (DOM), promising them 20% of their investment sum upfront and the remainder, two years later.

At around March 2014, EcoHouse stopped selling its Brazilian properties in Singapore after investors filed lawsuits against it for failing to pay them back on time.

By August 2014, EcoHouse had shut its Singapore office.
Info source: BT

The wife and I have been following the EcoHouse saga since July of last year. While some may trumpet this as another example of why Singapore property investors should just stick to local properties (given the zero default rate) rather than venturing overseas, we feel that the EcoHouse debacle is not a representation of all foreign property investments out there.

Having been involved in foreign property purchases over the past few years, the wife and I are particularly mindful of the risks that come with such investments. Other than your typical purchasing decisions associated with buying an investment property (location, demand/supply, interest rates etc.), one will also have to factor in additional considerations such as exchange rate fluctuations and even the economic and political situations of the country concerned. 

So in our opinion, the takeaways from EcoHouse are:

1. When something sounds too good to be true, it usually is
Although foreigner property developer/marketer may entice you with attractive return/yield expected on their project, the wife and I have yet to come across anyone who offers us 20% fixed-rate of return within 12 months. And even if we did, we have to ask ourselves whether such "offers" are realistic and sustainable as a business model.

2. Do your own homework and make informed decisions
Find out as much as possible about the foreign property that you intend to put money into. This is not limited to just details of the project itself but also the credibility of the developer concerned, e.g. are they reputable in the market? how many projects have they developed? how well-received are their previous projects? It will also be helpful to know what the locals think about the said project - you be surprised how much information you can actually obtain just by Googling the project or developer.

3. Experts are but human
They are not right all the time! So do not go into a purchase or participate in any "co-investment" schemes simply because someone who is supposedly an expert in property investment tells you to do so. The EcoHouse episode is a good example of how even the so-called "expert" can get it wrong.  

Caveat Emptor!

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