People have traditionally put their money into land, which is a growing asset. Due to the rising scarcity of land and high demand for it, such real estate developments have offered investors good returns and have assisted them in accumulating wealth. Even though current high-rise residential unit ventures have very little land ownership and are mostly made up of depreciating assets, commercial real estate investment generates far more cash flow through rentals. Investing in high-end real estate, on the other hand, requires a large sum of money that is only available to HNIs and Ultra HNIs. Bengaluru, Pune, and Mumbai have emerged as the most promising destinations for fractional commercial real estate investments in the future.
Increasing demand for fractional commercial investment by professionals
Doctors, IT experts, Entrepreneurs, and other company owners are among the investor and user sectors with the highest relative interest in fractional ownership of commercial real estate. Around 30% of chartered accountants planned to invest in commercial real estate, followed by lawyers (21%), doctors (15%), IT professionals (13%), entrepreneurs (11%), and business owners (11%). (7 percent).
These investors prefer fixed income choices with a physical asset as collateral, and they’ve begun to appreciate fractional CRE’s favorable risk-return profile and end-to-end management provided by fractional ownership platforms. In India, fractional investing has existed for a long time, although in a disorganized form. Even now, many investors consider residential real estate to be their only option, and we want them to be aware of CRE as a viable alternative.
Over 1500 high-ticket registered consumers and investors were polled to compile the results of the survey. According to the report, 68 percent of interested commercial real estate (CRE) investors are between the ages of 36 and 60. 15 percent of potential investors are between the ages of 25 and 35, while the remaining 17 percent are beyond the age of 60.
Our platform addresses the most prevalent issues, such as huge ticket sizes, operational tasks, lengthy and complicated documentation, a lack of expertise, and trust, to make this a more inclusive and accessible asset class.
Although investors aged 60 and up have generally been skeptical of alternative investing, this is changing. CRE allows these investors to earn a stable monthly inflow backed by collateral, as well as the possibility of an annual capital increase over time. This allows investors to enjoy additional gains due to capital appreciation at the time of exit. The poll identifies certain significant needs and adjustments that traditional CRE investors require, such as faster access to opportunities, more transparency, data symmetry, and process efficiency. Fractional ownership platforms are addressing these difficulties in India’s CRE market to increase trust and transparency.
With the new laws and regulations in place, investors will feel more confident in CREs and will be able to profit handsomely from the country’s potential real estate opportunities. Investors’ investment preferences differ with age, according to the survey. Young investors have a high risk-high-reward appetite and are willing to diversify their property investments geographically. As many of them are retired and do not have a regular source of income, older investors seek a low-risk investment option with collateral-backed secure fixed income. Because it meets the needs of both segments, CRE is a unique asset type. Monthly rental income might provide individuals looking for a reliable source of fixed income with reasonably high yields.
The risk profile of fractional ownership opportunities aligns nicely with the objectives of conservative investors because they are secured by an underlying hard asset. Younger investors seeking double-digit annualized returns favor such possibilities because, after accounting for yearly capital appreciation, they can achieve an IRR of 17 percent to 25 percent without compromising their risk profile.
CRE has experienced greater participation from female investors as India’s demographics move to more equitable gender distribution. According to the survey, female users and investors made up 41% of the entire group of people polled. Compared to most investment options, this gender distribution is more egalitarian.
Cities, among other significant markets, are gaining the most traction, according to the poll. Bangalore is the most popular city for fractional ownership, with 27 percent of investors interested, followed by 21 percent in Pune real estate. According to the survey, the NRI community views India as an emerging market for investment, with nearly a third of respondents hailing from the United States, the United Arab Emirates, the United Kingdom, Denmark, Nigeria, and Australia, among other countries.
The saying “The rich become richer, and the poor get poorer,” may be true for investment possibilities in our country, where promising opportunities such as Commercial Real Estate (CRE) are only accessible to High Net-worth Individuals (HNIs). Retail investors, on the other hand, were limited to high-risk stock markets or low-return provident funds. The CRE market, however, has been democratized with the introduction of fractional ownership, and may now be accessed by the common person. Fractional ownership is a new yet promising concept in India that allows numerous investors to pool their money and acquire a CRE property.
Assetmonk is a smart real estate investment platform that offers a variety of investment alternatives, including Growth, Growth Plus, and Yield models with a maximum annual IRR of 21%. Visit our website today to get started on your real estate journey.
Fractional Ownership of the commercial real estate FAQ's:
Commercial real estate in India is expected to perform well in the coming months. In 2021, commercial real estate and REITs are predicted to begin to recover, with the availability and efficacy of a vaccine driving the rate of recovery.
Income or appreciation are two ways to profit from commercial real estate investments. The building’s functioning generates income, which is often in the form of rental payments from tenants, while appreciation is received when the property’s value rises over time.
Depending on the geography, the present economy, and external circumstances, commercial buildings typically have an annual return on investment of 6 percent to 12 percent (such as a pandemic). That’s a significantly wider range than is typical for single-family residences (1 percent to 4 percent at best).