Every onlooker has been mesmerised by the towering skyscrapers, opulent office buildings, and glistening showrooms. These lavish offices are the stuff of dreams for many millennials, who spend most of their waking hours there. When purchasing commercial property (CRE), many paid employees cannot afford it. Fractional ownership, on the other hand, has changed that. Commercial Grade ‘A’ real estate can now be purchased by individuals through a new investment strategy called fractional ownership.
Investments in residential real estate have been limited for a long time. However, this is changing. More than $5 billion is anticipated to be spent on fractional ownership in India over the next several years, according to analysts. Investing as little as Rs5 lakh will get you a piece of
prime commercial real estate in metropolises home to IT parks, multinational corporations, and warehousing owned by e-commerce giants. As the storm of fractional ownership rages on, the Indians are left in a state of confusion and apprehension.
Understanding Fractional Ownership Concept
Fractional ownership refers to the practice of purchasing a prime piece of commercial real estate in small chunks by a group of investors, whether they be individuals or institutions. By participating in a high-value commercial real estate (CRE), investors often agree to share passive ownership of the property. Each of the property’s fractional owners receives a portion of the property’s profits and returns. It is possible to provide regular cash flows and long-term rewards for investors while reducing their financial burden through fractional ownership. In order to diversify one’s investment portfolio, it is possible to invest in a wide range of CREs from across the world.
Let us assume that Rs100 crore is the estimated value of a high-end office building in Gurugram’s ideal location. A global MNC has already pre-leased the CRE, ensuring consistent cash flow and long-term capital appreciation, and This is how it works. If you have Rs20 lakhs to invest, you can’t buy the home alone. For example, by using Definite, you may share a portion of your workplace with a group of like-minded investors. Therefore, ordinary investors can invest a fraction of the cost in CRE worth Rs100 crore.
There is a lack of suitable investment opportunities for working professionals in India, particularly in the real estate sector. Investments in the stock market, on the other hand, have the potential to provide significant returns but also entail a high degree of risk. Given that land is an appreciating and secure asset, CRE investment is becoming increasingly attractive at this point in the cycle.
They are providing regular monthly income and capital gains over the long run. After achieving a good profit, investors have the option to sell their shares whenever they choose.
Fractional Ownership Growth Factors
Over the past decade, fractional ownership has become increasingly popular in the United States, Singapore and Hong Kong. Because of a rapidly expanding population, land restrictions, and a wide array of commercial real estate possibilities, the concept is gaining popularity in India. Investing in residential real estate has long been considered a safe bet in India. A stock market is a viable option for young investors, even if they can’t save a large amount of money. Because they have the proper connections, specialised knowledge, and substantial wealth, institutional investors and High Net Worth Individuals (HNIs) have been banned from investing in CRE.
Technology-enabled platforms make real estate investing more accessible to the general public by making a wide variety of assets and locations available to a broader range of investors. Younger generations with a penchant for technology are increasingly turning to these real estate platforms in search of new ways to generate money for real estate investments. With these platforms, investors can receive customised services that meet their specific demands and budgets. Because of its expanding capital value and consistent rental income, CRE has become a feasible investment choice for a large part of the Indian people.
Investors’ trust in conventional assets has been shaken by the spread of the worldwide epidemic. Investors are turning to fractional ownership as a low-risk, high-return strategy in the face of rising market volatility, low returns, and a protracted pandemic. Because of these benefits, individual investors have been swayed by the portfolio diversity, accessible exits, regular rental income, and capital appreciation of CRE fractional ownership. As the CRE industry in India is expected to increase by 13-16 per cent in the next five years, fractional ownership of CRE is a lucrative and promising investment.
Finishing the Job
Many Indians have been unable to invest in Grade A commercial buildings due to a lack of understanding, lack of connections, and a lack of funds. The CRE industry is opening up to fractional owners as technology continues to level the playing field in numerous sectors and venues. Inexperienced and undercapitalised individuals can now own a piece of income-generating commercial real estate through fractional ownership. By collaborating with tech-enabled platforms, they can streamline the process of investing in CRE and increase their chances of making money while diversifying their holdings. Employees in large office buildings will soon be the proprietors of the buildings they work in.
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