EcoHose Developments Limited, the Brazilian social-housing development that amassed up to $65.55 million from
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
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:
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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