Fractional Ownership Of Commercial Real Estate: Enabling Indians Living Abroad To Invest With Low Prices

32

You would be lying if you said you never fantasized about acquiring those piercing towers, luxurious office spaces, and gleaming showrooms at some point in your life. But what kept you from going any further? Buying Commercial Real Estate costing crores is out of reach for most people. At least, it was the case until the introduction of fractional real estate ownership. Individual investors can now own a piece of Grade A commercial real estate through fractional ownership, causing a real estate investment storm.

Every passer-by has been drawn in by the piercing towers, luxurious office buildings, and gleaming showrooms. Millennials spending half of their days working in luxurious office spaces have all fantasized about acquiring one at some point in their life. However, buying commercial real estate costing crores is out of reach for most people. At least, it was the case until the introduction of fractional ownership. Individual investors can now own a piece of high-grade commercial property through fractional ownership, causing a real estate investment storm.

Real estate investments get limited to residential buildings for a long time. But that is changing. Analysts predict that fractional ownership India will exceed $5 bln. in the future years. Individual investors may buy a piece of high-end CRE in metro towns that are home to MNCs, IT parks, and warehousing operated by E-commerce giants for as little as Rs5 lakh. As the tempest of fractional ownership rages on, a mist of fear and ignorance perplexes the Indians.

What exactly is Real Estate Fractional Ownership?

The average investor frequently faces a scarcity of feasible investment possibilities in the real estate sector. Bank fixed deposits do not provide positive returns. Stock market investments provide favorable yields but also carry a high risk.  

But, investment in commercial real estate is attracting considerable interest notion at this time. Commercial properties are appreciating and stable asset that generates monthly returns and long-term earnings. Aren’t they valued in crores? Do you not require deep pockets to invest in it? Welp! 

You can now invest in that massive commercial property through fractional ownership. But, how so?

Fractional ownership is where a number of investors acquire high-grade commercial real estate in chunks or fractions. They share ownership of a high-value commercial real estate by investing in such a property. The resulting returns and income get allocated among the property’s fractional owners. Fractional ownership decreases a single investor’s financial strain by allowing to create consistent cash flows and rewards. Furthermore, through investing in many commercial office buildings in different areas, investors diversify portfolios.

For example, a prime office building in a favorable location in Bangalore is worth Rs100 crores. A significant MNC has already pre-rented the commercial property, assuring consistent cash flow and capital appreciation. An investor only with INR 20 L to start investing, on the other hand, is unable to purchase the house on his own. However, with an online fractional ownership platform like Assetmonk, individuals share and co-own the commercial building with a group of comparable investors. Via Assetmonk, an investor only needs to contribute a minimum of Rs. 10 lacs. Yay! Consequently, ordinary individuals can participate in CRE worth Rs 100 crore for a fragment of the property cost. 

Fractional Ownership Enables You To Invest In Real Estate At a Low Price?

There is no shame in admitting that we have run away from commercial real estate investments because we do not possess the lacs and crores needed to invest. It is perfectly understandable if you have refrained from taking a loan from the bank to finance the investments. Also, lack of information and relevant contacts have kept most Indians from engaging in Grade A commercial buildings. 

However, the technology has enabled and leveled the field for the commoner in various sectors and venues. The commercial real estate sector is more accessible to investors by becoming fractional owners. All that gets needed for the investor is investing Rs. 10 Lacs. He can invest in any commercial space with only INR 10 L. Despite inexperience and limited resources, fractional ownership permits middle-class persons to own a portion of yield-generating commercial assets in numerous places. Partnerships with fractional ownership platforms like Assetmonk help people develop wealth, diversify their portfolios, and earn consistent earnings by easing their road to investing in commercial real estate. Employees working in massive office buildings may soon be the proprietors of commercial premises.

How Else Can Fractional Ownership Benefit You?

  • Property Appreciation: Owning a fraction of a commercial property is cost-effective and provides a double return. The first is the benefit of direct investment returns, while the second is the benefit of asset appreciation. Because you own a piece of the real estate, the worth of your stake will rise as well. It is well-known for its institutional investments. However, it is becoming a realistic investment option for astute middle-income investors.
  • Rental Income: Rental income is deposited directly into the account each month. Through continual rental revenue and appreciation, commercial property fractional ownership gives a high return on investment. Commercial property investment in India has risen at a CAGR of 16 percent over the previous five years. Aside from the value gain, you may anticipate a 15 percent rise in rental income returns over the following three years if you buy with a respected fractional ownership company. It is incorporated into the rental agreement to safeguard against future inflation, guaranteeing that your investment remains stable over time.
  • Tenants: Occupants in residences frequently depart, causing the owner to lose rental money until a new tenant gets found. Every commercial property has a three-year lease term. The lease, however, can get extended. It merely ensures a consistent income. Clients in high-end properties include large multinational corporations, banks, and information technology firms with massive budgets. They pay their rental fees on time. Furthermore, because of the time, effort, and money engaged in transforming the apartments into offices, such tenants typically extend their renting term. For higher returns, it is best to invest in a pre-leased property.
  • Stability: The commercial real estate dipped during the nationwide lockdown. But, it quickly recovered in the third quarter. You may rely on passive real estate income instead of the turbulent financial markets. Year on year, the net absorption of commercial real estate climbed by 63 percent. Furthermore, new completions jumped to 59%. Covid-19 decreased the global values of real estate. But, because of the extensive outsourcing sector of the country, commercial leasing rose in the same period, per industry observers. Over 63% of commercial space rented in India gets used by international enterprises. It should convey a strong message to Indians and NRIs the moment has arrived to invest in commercial real estate. The values of commercial property will soar in the years ahead. As a result, it is a great moment to start investing in fractional ownership investment.
  • Cost-effective: Fractional property investment is one of the low-cost real estate investments. Premium-quality office space in Bengaluru costs Rs 400 crore to rent. It is a massive investment that is usually only doable for High-Net-Worth Individuals. But, through fractional ownership, you may become an owner of the property with others for as little as Rs 10 lakh and enjoy the returns from rental income varying from 6% to 10% each year. Such an investment might provide a rental income spanning from INR 60,000 to INR 1 L annually. A comparable residential property, on the other hand, would generate only 1.5 percent to 3 percent. Covid-19 significantly impacted the residential real estate, where home values fell by 2% to 7% in the preceding year.

Comments

comments