How does Ethis manage the risks involved in real estate investing?

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So you want to make an investment through but aren’t too sure about the risks involved? 

First, let me congratulate you on considering making an investment through We’re on a journey to push the boundaries of Islamic finance and for you to join us is great news. Alhamdulillah, our family of investors is growing every day!

Maybe it was our social impacting projects, such as our affordable housing campaigns, that got you interested. Or maybe it was the high projected returns – an average of 15% on one-year investments! – that really hooked you in.

But you still have a few questions left, particularly on the risks. What risks do these projects have? How are they controlled? And, aren’t high returns usually linked with high risks?

Well, let me put your mind to ease. takes the word Islamic in Islamic Crowdfunding Platform seriously. You should be aware that no investment is completely risk-free, including the ones that we back. However, our project partners take careful steps to control and lessen those risks.

Today, I’ll share some of the ways that campaigns at have their risks mitigated.

But before that, let’s talk a bit about risk sharing.

Risk Sharing

Risk sharing is an essential part of Islamic finance. The true test of whether a financial action is really Islamic or not is if it has risk sharing.

The principle of risk sharing is derived from the fiqh legal maxim:

“الغنم بالغرم”

  “(Entitlement to) profit is accompanied by responsibility

                (for associated expenses and possible loss)”

What that means is that a person has the right to profit only when he takes up the burden of bearing risk.

Leading Shariah scholars and Muslim economists declare risk sharing an essential part of Islamic finance.

In the Kuala Lumpur Declaration of 2012, Muslim scholars declared that risk sharing has the “ability to promote financial inclusion and asset-building capacity of the poor and thus better sharing of prosperity”.

Furthermore, risk sharing:

  • Minimizes moral hazard (when someone takes on more risks because he knows someone else will bear the cost of those risks)
  • Links finance to the real world and limits the amount of debt created
  • Expands the presence of people in economic growth because profits are more effectively shared
  • Forces Muslims to understand that Allah swt gives Rizq (provision), and they should use and circulate it for good.

Don’t confuse risk sharing with speculation or risk-taking behavior. It is risk sharing with risk management.

As the Prophet’s Hadith teaches us, tie your camel first then place your trust in Allah.

Another important thing that I feel we need to introduce to you before we focus on risks is our associate company PT Ethis.

PT Ethis

PT Ethis is a Singapore-owned licensed real estate developer in Indonesia with an authorized capital of US$1.5million. It sets up joint-venture companies with the main developer of each project, to ensure that investment monies, as well as project revenue and profits, remain in this joint-venture company. This is similar to the standard Project Financing model using SPVs (special purpose vehicles). PT Ethis has financial oversight of the cash flow of the project and is also able to take up assets as collateral as a form of security.


screening and due diligence

1-Screening and due diligence:

PT Ethis puts any campaign through a very thorough screening before we launch it.  Approved projects must then match the internal screening criteria set by, which includes Shariah compliance, transparency, and clarity.

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PT Ethis’s screening involves checking to ensure that the developer of a project has valid documents and good track records. We take a close look at licences, permits, partnership agreements, availability of customers with financing and the list of parties involved in the project.

In addition, PT Ethis conducts periodic on-site inspections crowd-checks with stakeholders and related banks and organizations.

As a platform, we strive to match our community of crowd-investors to the best projects sourced by PT Ethis.


risk of project failure

2-Risk of project failure:

A risk of complete project failure is highly unlikely but we wouldn’t be the best in what we do if we didn’t prepare for all outcomes.

To protect against total loss of capital, PT Ethis requires collaterals from the project developer, typically in the form of land or housing units. PT Ethis may also request a personal letter of guarantee from the developer in case of any negligence from his side.


Currency fluctuations3-Currency fluctuations

Another risk that we’ve considered is potential currency loss from an appreciation of the investor’s currency. If the investor’s currency is stronger at the time of project payout than at the time of first investment, then profits and even capital will be eroded. Fortunately, in our campaigns, you can enter with a fixed exchange rate and get your payout with the same exchange rate. PT Ethis guarantees this through a Wa’ad (promise) contract. Islam accepts this form of currency hedging as PT Ethis is categorized as a third party in this case.


Risk of delays4-Risk of delays:

The main risk in our projects in Indonesia is the risk of project delay, usually because of bad weather. Because of that, our campaigns have a buffer period of a month or two already included in our projected time frame.

 helps to diversify

5-Helps investors to diversify:

It is possible to make a loss in any investment even if you invested in a successful company or industry. For this reason, it is highly recommended that you always diversify your investments. If one investment loses, you can gain from another. Remember, don’t put all your eggs in one basket!

The great thing about campaigns is that they don’t require large amounts from the crowd read more. For first time investors, it is US$200 and for repeat investors, it can be as low as US$600. This makes it easier for you to spread out your savings over several investments.

Are there any issues that I haven’t mentioned that might make you hesitate to invest in the real estate market in Indonesia?

Leave your comments below and we’ll get back to you as soon as possible.

Read more on the Sustainable Development of an Islamic Financial System

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Ethis Malaysia: Islamic Equity Crowdfunding
halal investment

We operate ethical investment platforms approved by regulators in Indonesia, Malaysia, and Dubai, and also run a charity platform Global Sadaqah serving ordinary people, high-net-worth individuals, corporates and government entities. Best known for crowdfunding impact investments for Indonesian social housing development projects we adhere to the United Nations Global Compact ethical standards and are based on Islamic finance.