Let us look at some of the key aspects that have aided NRI, OCI, PIO real estate investments in India. Non-Resident Indians (NRIs) who want to participate in the Indian real estate market should be aware of the rules that govern the purchase, sale, and rental income generated by a property.
Fractional Ownership in India: What Will Happen In The Next 5 Years?
The concept of fractional ownership in the Indian real estate market is still in its infancy, but it is expected to get valued at more than USD 5 billion. Fractional ownership is the future of the Indian real estate industry since it addresses an issue with commercial property: the high entry barrier of required investment.
If this pandemic has forced us to reconsider how we make financial decisions and save and invest, it has done so. As if wage cutbacks and layoffs weren’t awful enough, hundreds of individuals lost their hard-earned investments in stock markets and mutual funds, and some had to break fixed deposits or sell the property to access their assets.
The dire questions we all have: how to build a pandemic-proof and reliable investment that gives regular and liquid dividends directly to our pockets while also providing long-term financial appreciation? Surprisingly, one type of investment shone out in the previous year: fractional ownership of commercial real estate (CRE). It is still in its infancy in India, but the market is now valued at $5 billion and expanding. Fractional ownership is predicted to be the future of the real estate industry since it addresses one of the most significant issues with commercial property: the high entrance barrier or capital expenditure required.
The fractional ownership market in India is steadily growing, with the CRE market expected to expand 16 percent in the future years. The demand for fractional property will rise as a result.
But, first, let us understand what fractional ownership is all about.
So, what is fractional ownership?
‘Little drops of water, Little grains of sand, Make the mighty ocean’ are timeless phrases by poet Julia Carney. Small, yes!
Let us be honest about something. We have all run away from the thought of investing in real estate because the capital outlay needed is too high for us. However, let me tell you that that can change now. Let me tell you that you can now invest in real estate and the commercial real estate market with just a few thousand rupees through fractions ownership. Assetmonk, for example, offers high-quality real estate investments with a minimum starting amount of Rs. 10 lacs. All hail, fractional ownership!
A fractional real estate ownership plan is an investing strategy in which a group of people pools their assets to get finance to buy real estate. Each investor has a stake in real estate. It is the ideal investment since all members share the costs, earnings, and financial obligations for the property. For instance, fractional property ownership is analogous to stock market investing. The investor can choose which properties to own infractions. In actuality, however, the concept does not correspond to the stock market.
Real estate investments are advantageous types of investment due to high asset appreciation. Investors can utilize fractional ownership to diversify their investments. However, real estate investments require significant capital, making the asset class inaccessible to investors. Investments in assets for personal and business reasons like private boats or Special Purpose Vehicles are part of fractional real estate ownership. As a result, high-end investments are now available to people of all financial backgrounds.
Why are fractional investments in commercial real estate on the rise?
In India, fractional ownership is still in its infancy and yet to get recognized as a mainstream investment class, similar to equities and mutual funds, although it is gaining appeal. To determine whether or not this investment strategy will be successful in the future, we must first analyze its current state. While the concept is still relatively new, the fractional ownership sector in India gets believed to be worth $5 billion in the next five years.
In India, fractional ownership of commercial real estate is progressively increasing, with the CRE market predicted to rise by 13% to 16% over the next five years. Some of the causes for this anticipated boom connect to the increased need for office space in the future year, growth in the number of significant institutional investors, and a substantial infusion of foreign money associated with several commercial projects. All of these elements add to the possibility of wealth appreciation.
Commercial Real Estate often consists of Grade A properties frequently leased by Multinational Corporations, Banks, Warehouses, Factories, or Information Technology firms with large budgets. In contrast to residential renters, such companies do not frequently leave the premises on short notice, placing the property owner in a bind. A business space rental contract, on the other hand, is for three years or more. As a result, one advantage of renting land to commercial organizations is that they pay the rent on time and design the entire space to their specifications. Furthermore, because they utilize the property as an office, they devote all of their efforts to keeping organized and are more inclined to extend their lease rather than seeking a new location.
After seeing a monthly deposit in their bank account and the market’s continuous rise, many interested parties are keen to invest in fractional shares of Commercial Real Estate.
So, what is fractional ownership in the India scenario?
Fractional real estate ownership is still in its early stages in India. Although it is gaining popularity, it has yet to get recognized as a mainstream investment class akin to stocks and mutual funds. In India, the fractional ownership sector gets valued at $5 billion.
Commercial Grade Property Ownership includes office complexes, warehouses, and factories. Because of the high quantities of money necessary, commercial real estate has remained the realm of HNIs and Ultra HNIs. As a result, middle-income investors have just two options: volatile stocks or low-interest fixed deposits.
Because of fractional ownership, investing in high-quality commercial real estate assets becomes cheaper. Because of this concept of real estate investing, Indians may own commercial property that fits their budgets. As a result, the monopoly of HNIs in commercial real estate investing gets broken.
The Future of Indian Real Estate: Fractional Ownership
While most of us are skeptical about the viability of fractional ownership in India, other experts feel it is the future of Indian real estate in 5 years.
- Making real estate accessible to all: Commercial real estate has traditionally gotten very profitable. But due to the costs involved, middle-class investors seldom enjoy such high-yielding assets. Investors having a stake in a company can engage in high-end investments alongside HNIs.
- Guaranteed asset appreciation and consistent growth: Commercial real estate is one of the few asset groups that recovered swiftly following the epidemic. While other real estate took a back seat during the epidemic, CRE and office leasing grew in India. Furthermore, MNCs establishing a presence in India have raised the demand for commercial real estate, making it a solid investment with potential asset appreciation and constant growth.
- Long-term lease: Commercial leases, unlike residential leases, are for lengthy periods, and tenants from MNCs or IT businesses tend to rent out premises for long periods or renew their leases and never fail on their payments. It assures a steady stream of passive revenue for you.
- Decent IRRs: Fractional ownership guarantees returns and growing return rates in rental income and capital appreciation. Investors may expect a 15% increase in rental returns if they invest in a solid firm through a reputable platform. For example, Assetmonk provides Grade-A goods to its investors, on which they may easily earn IRRs ranging from 12% to 21%.
- Zero hassle: Fractional investment for investors is a low-cost real estate investment that does not require maintenance efforts on its owners. Assetmonk, a real estate investment platform, simplifies the investing process even further by completing due research on the CRE and only bringing Grade-A investment proposals to the table. They also adhere to strict transparency and customer-first practices.
As a result of the extreme volatility and losses of the stock market, we have seen a substantial increase in investors wanting to invest in CRE and other high-value assets. Commercial real estate has long been an essential asset for institutional and ultra-high-net-worth people, and based on our previous experience, it may also get regarded as a recession-proof investment to some extent.
Individual investors can take advantage of these safe and secure investment options through fractional ownership and explore them for their benefit. Real estate can be very beneficial if approached strategically; fractional ownership can be a reliable investment for young people and senior citizens nearing retirement.
Assetmonk is a WealthTech Platform that offers fractional real estate investment choices in Hyderabad, Chennai, and Bangalore and IRRs ranging from 14 to 21 percent. We provide three product categories where you can grow your money: Growth, Growth Plus, and Yield. Come and learn more about our asset offerings from our website and connect with our advisor to start a conversation.
Fractional Ownership in India FAQ'S:
A regular timeshare product allows you to visit the property for one to two weeks each year. However, fractional ownership allows you for five weeks or more per year.
Fractions ownership of real estate offers many benefits to the investor. These are.
- A quick method to invest
- Low investment, high reward
- Consistent earning
- Diversification of a portfolio
- Market Stability