Check These Factors Before Joining A Property Stokvel

Although property stokvels are steadily gaining popularity and being hailed as a new way to open up the property market to more individuals, not everyone is sold on the concept.

On a recent episode of Real Talk With Anele on SABC3, entrepreneur Sizwe Dhlomo and financial planner Gerald Mwandiabira both shared which aspects about property stokvels are concerning.

According to Mwandiambira, the concept of a stokvel in its purest and intended form is being blurred by crowd funding and syndicated financing. These are not all interchangeable concepts. 

Here is how the financial planner explains stokvels: "Stokvels are about knowing each other, ubuntu, people getting together. It is all about trust and relationship. You can't go into a stokvel with strangers, especially a property one. Getting married to someone is enough of a challenge, nevermind a bunch of strangers."

Sizwe Dhlomo
Credit: Twitter

Red Flags To Watch Out For

"There is a very big difference between a stokvel to buy food, a burial stokvel for example, and now to buy property," Dhlomo clarified in response to a question on why he has concerns.

He said the probability of withdrawals coming in at the same time are next to 3% because people don't all die at one time so members won't have to withdraw money for burials all at the same time. "So the risk of you guys running illiquid is very low." 

Dhlomo said the same applies with food stokvels where members take advantage of economies of scale to buy groceries in bulk. Another advantage is that they are short term and fixed. They dissolve within a year and start afresh the next year.

"Once you start talking about property and the way people have been explaining it, they are asking for everybody to just come in, then it's no different than a pyramid scheme at that point," he stated. Here are three markers to help you determine when to sign up or stay away.

It Is Not A Stokvel If:

  • You don't know the number of people participating in the stokvel 
  • You don't know what the term is 
  • It doesn't have a clear, written goal