Investment

Ethis Detailed Review – A Halal Far-Eastern Property Investment

Ethis is a property crowdfunding company based out in Malaysia, with offices and operations in Indonesia and Dubai. We have been following their progress for a while and have been impressed by their progress to date.

They have raised over $12m over the last three years, with their group of over 21,000 investors making 1400+ investments. Typically their investments make between 9-13% annually.

Those impressive stats got our attention and we decided to dig deeper. In this article we share what we found. We cover:

  1. What Ethis actually does (it’s not just property crowdfunding)
  2. Ethis Indonesia – which is the primary projects Ethis offers
  3. How does investment into Ethis work?
  4. Pros and cons of investing in Ethis

Overall, we like Ethis, particularly given that it gives Muslim investors in the West the ability to invest in something a little different and allows them to invest in an up-and-coming Muslim country.

What does Ethis do?

Ethis actually has 4 slightly different businesses that it runs under one umbrella. This can get a bit confusing for someone who doesn’t know Ethis. So here’s a quick rundown of the 4:

  1. Ethis Indonesia – its flagship property crowdfunding platform (more on this below)
  2. Ethis Malaysia – it has just launched its equity crowdfunding platform in Malaysia
  3. Ethis Dubai – it is looking to launchits property crowdfunding platform here in the coming months
  4. Global Sadaqah – this is a charitable crowdfunding platform based in Malaysia.

For the purposes of this article we focus in on Ethis Indonesia – as that is primarily where investors can currently invest.

Ethis Indonesia

Ethis Indonesia primarily invests in a mixture of social housing (in collaboration with the local government), residential development projects and commercial development projects.

The vast majority of their projects are social housing projects and offer strong returns. There are good economic and policy reasons for why this is the case.

Background on Indonesia

The reason the big focus for Ethis is on social housing is because, as they explain “in April 2015 President Joko Widodo launched the ‘One Million Homes’ program, to build a million homes a year and end its critical housing shortage.”

The idea is that the government provides subsidies to low-income families so that they can buy homes. The government has also reduced regulatory hurdles for developers to get clearance to build these kind of projects and as such, there is suddenly a boom in the Indonesian social housing sector.

Indonesia is generally a good bet as it has a large population (262 million), is growing at a rapid rate (4.7% every year since 1998) surpassed only by India and China, and is set to become the world’s fourth-largest economy by 2030.

How does investment into Ethis work?

Local and foreign investors can invest in Ethis projects.

You have to register on the Ethis platform and create your account. You can then access the full details of live and historic campaigns. Clicking through and choosing to invest in a project is straightforward – but if it’s your first time you will need to make sure you have provided all the relevant ID documentation etc. before you’re cleared for investment.

 

Once your investment has been made, you can check into your dashboard online and read periodic updates. Please note though, that some Ethis investors have commented that updates can be a little sporadic.

At the end of the project timeline, you get paid out your full investment along with your profit, minus the Ethis fee.

Two Case Studies

To give a sense of the kind of investments Ethis offers, here are two case studies. One is a recently-funded project and the other is a live project.

The Essential Daru 2

This was a SGD $141,000 fundraise (roughly £80,000) that ended up overfunding to SGD $180,000 (or just over £100,000).

The investment was a two-year project offering a 27-29% return (so around 12-13% annual return) and was to fund the second tranche for the land acquisition, licensing and infrastructure development of 520 social housing houses.

The developers were experienced (the investment factsheet provided details of multiple large-scale previous deal) and had backed the investment with assets worth over 200% of the crowdfunded amount.

The investment is structured as a musharakah contract (partnership contract) with the investor, developer and other third party investors (independent of Ethis) all pooling money together for this project.

Hasanah City

This is a currently-live SGD $560,000 (roughly £320k) investment opportunity over a year-long duration. It offers 13-14% return. About half of the investment has been raised already.

The money will be used to fund the construction of 20 out of 156 units on the project.

The developers are experienced and have backed the investment with assets worth over 150% of the crowdfunded amount.

The investment is structured as a wakalah contract (agency contract) with Ethis acting as the agent of the investors and charging a wakalah fee out of the overall deal pot. This does not affect the ROI of 13-14% offered to the investors, as the documentation clarifies.

Ethis Business Model

Ethis makes money from both sides of its platform:

  1. It takes 12.5% of gross investor profits at the end of a project; and
  2. From the developers, it takes around a 6.5% platform fee/wakala fee (depending on structure being used) but this can go up to 13% for first-time developers or higher risk projects.

These fees seem reasonable enough, especially considering the strong returns Ethis has been offering investors from its projects. Net returns of 9-13% annually are nothing to be sneered at.

Pros and cons of investing in Ethis

Pros

  1. The returns are as good as we’ve seen for property crowdfunding specifically. Given the slight jurisdictional risk involved, it makes sense to have a higher return for that additional risk.
  2. Sharia-compliant (evidence here).
  3. Investing into a market where there is clearly demand.
  4. Ethis is regulated in Indonesia so there is that peace-of-mind, and in case something goes wrong, you’ll have the regulator to contact.
  5. The projects are asset-backed.
  6. Simple easy-to-use website.
  7. Crowdfunding is a tried-and-tested model.

Cons

  1. Ultimately, you are investing in a development project and things can go wrong. If that happens you could end up significantly reducing your profits or even losing some or all of your capital. This is highly unlikely to happen but it is a risk.
  2. You are investing in a country quite a distance away and so if anything goes seriously wrong and you need to sue etc. you are going to be at a disadvantage compared to investing in the UK as a UK citizen.

Final thoughts

We think Ethis is a really interesting high-yield addition to the halal investment landscape.

Having discussed with Ethis at length over a number of calls their business model and general strategy, we are comfortable with them as a professional and credible business. Their 4.3/5 rating on Facebook based on 26 reviews also provides some further comfort.

Ultimately, Ethis is a relatively higher risk investment for a foreign investor as there is always that risk that comes with investing in a distant land.

However, the returns are strong relative to other property crowdfunding opportunities we have seen and we have seen no indications in our research of any major red flags. One to consider as part of your overall investment portfolio.

You can find out more about Ethis here.

12 Comments
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12 Comments. Leave new

  • Sofiane Bouadimi
    May 5, 2020 12:44 am

    Any comments in regards to the permissibility of investing in such a platform or Isit universally accepted that it’s halal ?

    Reply
  • Mohammed Sajad
    May 10, 2020 11:52 am

    I have invest in Ethis already and not seen a return so far but its still early days. Ethis are easy to contact generally speaking and come across as a relatively professional and well run team. I would echo the fact that updates on projects are very sporadic. I’m sure if one pushes and is persistent then updates would be available. The platform, although relatively intuative, is not updated on current projects and one can’t tell which projects have fully paid out and whether they paid out on time etc.

    Reply
    • Antoine Timmermans
      September 6, 2020 4:23 pm

      I’m interested in investing in Ethis, but I’m hesitant because of some of the negative reviews I’ve read: primarily concerning investors who haven’t gotten any returns yet.
      I’m curious as to whether you have seen anything in return by now

      Reply
    • abish kunnath kodakkat
      November 24, 2020 11:53 pm

      Hi

      Had u managed to get any returns?? Thanks

      Reply
  • They’re website isn’t working, are they still operating?

    Reply
  • Salam,
    New comments on their Facebook page have been left by different investors, saying that they’ve not received their returns. In fact, one member said that he invested in 2016 and he’s still waiting for his investment returns. I’m very interested in investing with Ethis, but the recent comments from members have not been very positive at all.

    Reply
  • Has anybody actually had any return at all on any project via Ethis – has any project actually completed?

    The Facebook reviews that actually had something written in them (rather than a rating) make for some worrisome reading.

    Reply
    • Just wanted to update this that I have actually now had returns on both of my projects.

      The gross return was as advertised on both of them.

      For one of them – the net return after conversion back to GBP was nil.
      For the second, the net return was 2%.

      All in all, the transfer fee and the fluctuation in the conversion rate generally reduced the net return by 4%.

      Reply
  • There is a new project available for investment in Malaysia, but reading the comments here and on FB I am not sure if this is a good option for me. I also tried to contact them on whatapp and Telegram but no reply.

    Reply
  • As the brother above mentions, the Facebook comments that have actual writing are people saying they’ve not received their return yet? All the other ratings don’t comment on the platform or provide any information at all. I was looking in to this seeing as you seem to rate it so highly,but with only negative reviews to go on and no personal experience (or atleast testimonials online) as to the success of such investments not sure what you’ve based your high rating of this platform on.

    Reply
  • Assalamualaikum Ibrahim. I have invested with Ethis and am wondering how to account for it in zakaat calculations. Would the zakaat be calculated after the investment has matured and it is returned with any profit? Or do you take the value of your investment?
    Jazakallah khairan

    Reply

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