Can fractional ownership heal the ailing Indian real estate sector?

Updated : October 21, 2020 05:13 PM IST

Fractional ownership allows flexibility in one's investment choices.

$Can fractional ownership heal the ailing Indian real estate sector?$

Authored by: Ankush Ahuja

Profitable investment in real estate needs proportionate capital. And to earn a proportionate capital one needs a profitable investment. This is the paradox where most real estate industry players are stuck until the concept of fractional ownership—a newer way to invest in high-yielding commercial real-estate (CRE)—came in knocking on the door. It is compared favourably with the other forms of investments like corporate bonds, fixed deposits, and gold, and yet produce a sizeable profit and considered safe.

The concept of fractional ownership has been evolving for about the last couple of decades worldwide. This evolution in the mode of ownership has occurred by democratising fractional ownership by opening the gates for small investments.

In India, fractional ownership is already a $5 billion beast and is bulking further with each day. It is an established market and anyone with solid mettle in the real estate industry knows the importance of it. First, one needs to identify high-yielding properties based on industry-specific criteria. This includes rigorously performing due diligence about the property and researching about its performance, tenant, cash-flows, and market scenarios.

It is important to invest in a valuable property and partially own it via a trusting platform. One should ideally invest in multiple properties to diversify their ownership, which further drops down one's risk of investment. One can earn either through monthly rentals from the property or by reselling it with a profitable margin. The rest of the journey is tracking and scaling your investment by consistently looking out for better opportunities.

With the digitalisation of the real estate industry, it has become easier to identify, buy, track, and scale investments through several available online platforms. These platforms allow investors to buy fractions of Grade ‘A’ properties.

Fractional properties like retail spaces, offices, data centers, cold storages, tech parks, and warehouses represent lucrative investment opportunities only if one knows how to access it. Fractional properties offer a plethora of choices since they come in many types and sizes.

In comparison to the residential assets, the rental yields from fractional properties are three times higher. This is because fractional properties are institutional-grade commercial assets, which one generally cannot access as an individual. This non-volatile form of investment grants more flexibility to diversify one's portfolio to help the investor in scaling his profits upstream.

Fractional ownership allows flexibility in one's investment choices. At any point during the investment, an investor can receive a return proportionate to the increase in the property's value by selling their shares. And even after selling them, the investor holds the legal title of the property based on his payment history and the corresponding number of fractional payments.

In this new age of investment, fractional ownership brings in a sustainable change. Especially in these difficult times, where the world and hence the market is struggling through a pandemic; the concept could be a medicine.

It can be a medicine to property developers, to drive them to build more quality properties; for mediators, to sell and earn money in more manageable and transparent platforms; and most importantly, it is a medicine for investors, to get into profitable investments without taking all the risk.

—Ankush Ahuja is Corporate Director & Head: International Business, Investors Clinic. The views expressed are personal

Published : October 21, 2020 05:13 PM IST

Can fractional ownership heal the ailing Indian real estate sector?

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