Traditional Commercial Real Estate Investing has been considered the playing ground of only the rich and the wealthy. For a high-yielding Commercial Real Estate Investment, a humongous sum of money was required. Surely, even you thought the same! But, as they say, “Change is the only constant”; the technology has destroyed the traditional real estate conventions and gave rise to new practices favouring the common people to invest in commercial real estate even with limited capital. The newly emerging PropTech industry has introduced the now popular western concept of ‘Fractional Ownership’ in India.
PropTech is a coined term for ‘Technology in Real Estate Properties’. Essentially, any technological upgrade to the existing real estate process is termed as a PropTech innovation. With a potential demand for fractional ownership options in India, PropTech start-ups have leveraged India’s middle-income population of over 5 crore families who can realize their dream of building real estate wealth with limited capital. In this article, we explore the renewed world of real estate through fractional ownership and 6 revolutionary changes in the system.
How Fractional Ownership works?
Fractional Ownership allows investors to get exposure to high-end commercial real estate projects at fractional or proportionate cost. Ever dreamt of owning a 5-star hotel or a glass-coated commercial tower? Yes, we are sure you have! But, maybe you thought it to be too ambitious or vague. Well, to your surprise, it’s not! With fractional ownership in commercial real estate, you can achieve the vaguest dreams like above. This new way of investing is benefitting small-scale investors with limited initial capital to try their hands in real estate and build long-term wealth.
The process of investing in a fractional ownership property includes finding out the potential high-yielding properties capable of generating consistent rental cash flows. A pool of investors come together through a common platform and invest in growth stages or completion stages of the best commercial properties. The investment platform creates a special purpose vehicle (SPV) with the pool of investors as proportionate shareholders of it. Through this SPV, the money is invested as well as distribution of rental cash flows is carried out to the investors. This distribution of rental cash flows is done proportionately to the capital invested.
6 Key Factors PropTech is revolutionizing through Fractional Ownership
Lowered Initial Investment in Real Estate
The PropTech firms foraying into Fractional Ownership investments have opened the gates for the majority of retail investors to experience institutional-grade commercial real estate. With a minimum of 25 Lakhs of investment, an investor can own a considerable share in top-rated pre-leased properties in Indian metros.
- Ownership without ‘Maintenance’
PropTech Investment Management companies manage the property and tenants with complete due diligence and safety. Thus, the property is managed by the investment management company and the investor being the fractional owner does not have to manage the rentals to get their returns. This becomes an added advantage for professionals and the working class who want low-maintenance real estate exposure.
- Secure Digital Payment Interface
The tech-enabled Fractional Ownership platforms provide safe and easy digital payment options enabled with features like digital signature, virtual investment, online transfers, digital KYC through Digi-locker, and so on. This enforces confidence within the investors living beyond the geographical boundaries of the project.
- Real-time Investment Tracking with Dashboards
The reason for a much-favoured boom in the stock market investing is the real-time tracking of stock prices on any digital device like your mobile phones, PCs, Laptops, and so on. Sensing the investor’s needs, PropTech firms have imbibed the same concept by introducing digital dashboards with real-time updates and tracking of projects along with the investment returns and yield. This technological intervention bridges the time and geographical barriers between the on-site real estate updates and the investors.
- Liquidity through Tokenized Properties
The Blockchain Technology of distributed ledger systems is not only famous for Cryptocurrency but is also used in Commercial Real Estate to split properties in tokens. Digital tokenization of properties enables instant buy and sell of fractional ownership on a digital marketplace. This ensures liquidity in the hands of investors as well as property distributors. PropTechs are striving to adopt this fairly new concept and make fractional ownership a much more lucrative concept in the future.
- Asset Management by PropTechs
PropTech firms offering fractional ownership properties manage the assets throughout the tenure of the investment. Along with that, complete due diligence and cash flow projections for the rentals are provided by these companies to the investors in the pre-investment phase. Full assistance is provided to make investors understand all the aspects of their invested money. Thus, investors need not worry about their money after investing through PropTechs.
The above 6 revolutions streamlined by the PropTech industry make fractional ownership the best investment option in today’s times. The pace of the world is increasing rapidly and so is the pace of real estate investments. Gone are the days of wasting long periods to carry out one real estate deal. With quick and virtual execution of real estate transactions, the PropTech industry has changed the face of real estate with fractional ownership.
As more and more evolving technologies kick in, the real estate sector is set to be a game-changer for its investors. Blockchain, Machine Learning, Artificial Intelligence, and much more is here to disrupt traditional real estate. Moreover, with integrated platforms, the investors would leverage the virtual investments with a greater sense of security and safety.
Banking on the strength of technology, Assetmonk has been a top player in the proptech industry. Assetmonk is striving to provide smart real estate investment options for the specific needs of investors. The fractional ownership options by Assetmonk, positioned in the premium localities of Hyderabad, Bangalore, and Chennai offer a great opportunity for long term retail investors to get a CRE exposure with a high long term earning potential of 14 to 21% p.a. To know more about the opportunities, reach out to us on Assetmonk’s website.
PropTech startups FAQ's:
PropTech is a coined term for ‘Technology in Real Estate Properties’. Essentially, any start-up innovating the existing real estate process with the technological upgrade is termed as a PropTech startup.
The PropTech industry is changing the traditional real estate facets with the help of technologies like Blockchain, Machine Learning, Artificial Intelligence, and much more. The above 6 revolutions in fractional ownership are significant examples of the power of PropTech.
The pace of the world is increasing rapidly and so is the pace of real estate investments. Gone are the days of wasting long periods to carry out one real estate deal. With quick and virtual execution of real estate transactions, the PropTech industry has steered real estate in the upward trajectory and ensured boosted confidence from investors.