These are the numerous investment opportunities available to NRIs in India. This article helps the NRIs to understand the different methods where they can be able to create tax-smart portfolio with their investments.
Debunking Popular Myths on Fractional Ownership
Fractional ownership is a relatively newer idea for Indian investors, which also makes it subject to speculation. As misconceptions breed around the topic, more and more people distance themselves from the investment class for their disadvantage.
What is Fractional Ownership?
Fractional ownership is an investment approach where the cost of the asset and risk associated with it is split between individual shareholders. As all shareholders split the asset prices and benefits, this makes the investment comparatively risk-free.
It is a common and reliable investment option for expensive assets such as aircraft, yachts, and commercial real estate properties and projects.
Despite the many fractional ownership benefits, a wary investor will always look for the cons of investing if they don’t know the asset class so well, and we understand that.
So here we will break down the top four of the most famous fractional ownership myths for you.
- Fractional Ownership is the same as timeshare
As both fractional ownership and time-sharing involve sharing a property by multiple parties, people tend to confuse one for another and use them synonymously, but here are the differences.
Fractional ownership, as the name suggests, is ownership of the property, and you earn the profit and losses that the property earns as well.
In a timeshare, on the other hand, only provides investors with rights to use the property for a specific period of time.
Fractional properties have a higher cost because you are making a purchase.
A timeshare holiday home costs lesser because it is similar to renting, and you have not purchased any ownership rights on the property.
Capital appreciation benefits
As this investment option includes ownership of property, it gives two-fold benefits, one could be the rent you earn on your property or use it for yourself and the other is the capital appreciation.
In a timeshare, you do not enjoy capital appreciation benefits.
- It is hard to get rid of fractional real estate property
As fractional ownership is most widely supported and promoted in the CRE sector, or large real estate properties, believing the investment to be illiquid is pretty easy. But that is a myth.
Fractional ownership might give you part ownership in a property, but still, what you have, is a share of it. And selling off a share isn’t as troublesome as selling off a real estate property.
Also, the platform you invest through plays a very crucial role in determining the liquidity of your asset. For instance, Assetmonk provides the investors with an opportunity to internally sell their share to the company or any other investor that makes the process lesser time-consuming and the investment, highly liquid.
- Fractional ownership for personal use
Many myths revolve around this point, some believe that fractional ownership is only for personal use and others don’t know the terms and conditions involved with using the property personally.
You can use fractional property, for personal benefits as well as commercial asset building.
We will discuss this in detail in some other articles in future, so keep in touch.
- Fractional Ownership in CRE is complicated
Fractional ownership is mostly approached by people from the middle-class background or other individual investors, as middle-class people, we have, for a very long time, relied on FDs, PPFs and Mutual Funds, even the closest we might have come to real estate investment must have been getting your own home.
And so the concept of fractional ownership might seem slightly alien and very much complicated to a lot of o investors. I have been there too, but to put it bluntly, the process is pretty easy.
Going chronologically, the first and most important step is getting in touch with a good investment platform. Perform detailed research on their background, look out for top customers and get in touch with them.
A company with a good credit history will never shy away from flaunting it, and if you don’t find property listings or success stories on their websites, it can be a huge red flag.
A good investment platform will always try to ease your burden and perform some tasks on your behalf and will always keep you updated on the progress made.
Assetmonk is a real estate smart real estate investment platform that promises high returns (up to 21%) on all fractional properties, not just that, as we perform the due diligence and other formalities on behalf of the customer, investing through Assetmonk becomes a piece of cake.
In conclusion, there are many myths that revolve around the topic of fractional ownership because it is new and there isn’t much information about it. Although we try our best to bring you all that we know and more, if you have any other queries related to our team or any other investment options, click here.
Fractional Ownership FAQ'S
Fractional ownership as an investment has a lot to offer, you get to enjoy high liquidity and returns, asset appreciation and safer investments as they allow you to diversify your portfolio.
At the same time one of the biggest downsides of the investment is that they leave little to no room for investor’s control over the property which could be a disadvantage for some investors.
No, timeshare is similar to renting a property, whereas in fractional ownership you gain property ownership.
It can last anywhere from three months to ten years, hence fractional ownership makes both, good short and long term investment.