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    PPF vs fractional investment

    • 5 min read
    • Last Modified Date: February 18, 2024
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    PPF vs fractional investment

    When saving for long-term goals like their children’s college education or creating a retirement fund, many Indian investors usually go for low-risk, guaranteed-return investments. It shouldn’t come as no surprise that the Public Provident Fund (PPF) is so prevalent in India, as a SEBI report states that 95% of Indians prefer safe investment options to increase their wealth.

    As a result, many Indians have made the Public Provident Fund (PPF) a mainstay of their financial portfolios, with generations after them urging their children to contribute money to PPF from the time of their first paycheck.

    What is PPF (Public Provident Fund)?

    A long-term investment option that provides an appealing rate of interest and returns on the amount invested is the Public Provident Fund (PPF) scheme. There is no income tax on the interest received or the returns. To participate in this scheme, one must open a PPF account. The amount deposited over a year is eligible for section 80C deductions.

    PPF – Key Information

    • Interest Rate: The annual interest rate for PPF is set at 7.1%.
    • Minimum Investment Amount: You can start investing in PPF with a minimum amount of Rs.500.
    • Maximum Investment Amount: The maximum amount you can invest in PPF per year is Rs. 1.5 lakh.
    • Tenure: The PPF scheme has a tenure of 15 years.
    • Risk Profile: PPF offers guaranteed and risk-free returns, making it a low-risk investment option.
    • Tax Benefit: Contributions made to PPF are eligible for tax benefits up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.

    What is Fractional investment real estate?

    A shared ownership structure of commercial properties is referred to as fractional ownership in real estate. With this strategy, investors pool their money together to make investments. Historically, individual investors were unable to obtain these sizable commercial assets due to their high costs. However, investors can now take part and benefit from property appreciation due to fractional ownership real estate companies.

    Fractional ownership platforms allow for investments with a minimum of Rs. 25 lakh.

    Why Fractional Investment?

    Investors in India can now purchase profitable and rather expensive commercial properties due to the fractional ownership model. How? Smaller investors can come together under this model, combine their funds, and purchase a commercial property together.

    The middle class in India has been interested in fractional properties for three main reasons.

    One is that they could split the cost of the property. Assume that the price of a commercial property is Rs 5 crore. That would normally price out the majority of small investors. However, the property can be purchased outright if twenty to twenty-five like-minded investors join together.

    Second, industry observers predict that commercial real estate (CRE) will continue to rise. The anticipated growth can be attributed to a number of factors, including increased interest from large institutional investors, increased demand for office space, and a significant infusion of foreign capital.

    The data, according to Statista supports that the CRE market is expected to exhibit a promising compound annual growth rate (CAGR 2024-2028) of 11.19%, leading to a substantial market volume of US$8.36tn by 2028. Moreover, over a comparable time frame, the fractional ownership model.

    according to the data from Knight Frank, the market size of fractional ownership properties in India—growing at an annualised rate of 10.5 per cent—is expected to expand by 65 percent, from $5.4 billion in 2020 to $8.9 billion in 2025. Commercial real estate generally exhibits strong capital growth potential.

    Third, the possibility of earning a substantial monthly rental income. The average rental yield for commercial properties is 8-11%, which is approximately three times greater than that of their residential counterparts.

    Other factors contributing to the impression of fractional property investment as secure and reliable

    High-quality tenants, like well-funded IT firms, banks, and multinational corporations, are granted access to fractional properties, which are Grade-A properties.

    With tight contracts and an average lease length of seven years, monthly rental income is assured. Every three years, the rental income usually rises by 15%.

    Price appreciation for commercial real estate has generally surpassed that of residential real estate.

    Why not PPF?

    A few careful investors have even been known to start PPF contributions as soon as the baby is born, guaranteeing that the fund matures exactly at the age of the child’s college education. That is the extent of confidence in PPF.

    Nevertheless, the PPF might not be the best option available today for reaching long-term financial objectives despite its historical appeal. The tax advantages offered by Section 80C of the Income Tax Act of India and PPF’s low minimum investment of Rs 500 are two of the main factors contributing to its widespread adoption. 

    However, PPF is no longer as advantageous for long-term financial objectives due to the variable interest rates that were implemented in 2011 and linked to the current economic interest rate. The interest rate has significantly decreased from its peak of 12% in 2000 to its current level of 7.1%.

    PPF is also not suited for middle-class investors due to its long lock-in period of 15 years, the inability to make partial withdrawals during the first six years, and the annual investment cap of Rs 1.5 lakhs. On the other hand, fractional real estate investment is becoming a more lucrative substitute.

    For example, suppose an investor chooses to invest Rs. 25 lakhs initially in a Grade A property rather than Rs. 1.5 lakhs annually in PPF. In six years, the property value would have increased to about Rs 38 lakhs, assuming a 7% annual growth rate in real estate, which is the same as the growth rate assumed by PPF. The total rental income for the duration would be Rs 14 lakhs, assuming rental yields of 10% after the first three years and 9% after that. As a result, the total return on the Rs 25 lakh investment would be about Rs 52 lakh, which could outpace the returns from a PPF and enable achieving life goals like retirement or education sooner.

    Difference between PPF and fractional real estate investment 

    Here’s a comparison table on PPF vs fractional investment

    FeaturePPF (Public Provident Fund)Fractional Real Estate Investment
    Investment TypeFixed income, low-riskReal estate, medium to high-risk
    Investment Duration15 years (can be extended)Varies (usually short to medium-term)
    Return on InvestmentModerate (fixed interest rate)Potential for high returns
    LiquidityWithdrawals are possible after five years with restrictionsLimited liquidity, long-term commitment
    DiversificationLimited diversificationOpportunities for diversification
    ManagementSelf-managed by the individualProfessionally managed
    Capital RequirementFlexible – can start with small amountsHigher capital requirement
    Risk ProfileLow riskMedium to high-risk
    Tax BenefitsTax-free interest and maturityTax benefits on rental income and capital gains
    Ease of AccessWidely available across banks and post officesAvailable on a lot of proptech platforms like Assetmonk
    OwnershipNo ownership of specific assetsOwnership in fractional properties
    Potential for AppreciationLimitedPotential for property value appreciation

    Bottom Line

    In conclusion, fractional ownership in land and commercial real estate emerges as a safe and stable alternative, offering better returns, transparency, and liquidity through proptech companies like Assetmonk, even though PPF has historically been a preferred investment due to its sovereign backing. Investors are urged to think about fractional investment as a practical way to reach their financial objectives.

    For investing in fractional ownership properties, Assetmonk is the best place for you.  Assetmonk has been leading the line in the emerging alternative real estate investment space, and seeks to provide investors with unique opportunities for fractional ownership of prime commercial properties with a high Internal Rate of Return (IRR) and flexible liquidity options.

    For long-term retail investors looking to expand their exposure to the CRE market and diversify their portfolios, Assetmonk’s fractional ownership options offer a high potential earning yield of 14 to 21% annually.


    Q: Can I diversify my portfolio with fractional real estate investments or PPF?

    A: Diversification is possible with fractional real estate investments as you can own fractions of different properties. PPF accounts, on the other hand, offer limited diversification opportunities.

    Q: Is fractional real estate investment suitable for individuals with a lower capital requirement than PPF?

    A: Fractional real estate investments typically have a higher capital requirement than PPF. However, some platforms allow you to start with relatively small investments. PPF accounts are more flexible and can be started with a small amount.

    Q: What is the rate of interest for a PPF account compared to fractional real estate investment?

    A: The rate of interest for PPF accounts is fixed by the government and currently stands at 7.1% per annum. Fractional real estate investment returns depend on the property’s market value and rental income potential.

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