Fractional ownership, also known as fractional investment, is relatively new concept in the Indian real estate sector. It allows multiple investors to pool their resources together to purchase a commercial property, where each investor owns a fraction of the property.
Fractional ownership has gained popularity in India, especially for commercial properties, as it offers several advantages over traditional real estate investments.
Advantages of Fractional Commercial Real Estate Investment in India
- Diversification: Fractional ownership allows investors to diversify their investment portfolio by investing in multiple properties with a lower capital outlay. This reduces the risk associated with investing in a single property and provides a more balanced investment portfolio.
- Access to Premium Properties: Fractional ownership allows investors to own a part of a premium commercial property that they might not be able to afford on their own. This provides investors with the opportunity to invest in high-quality properties with a lower capital outlay.
- Lower Risk: Fractional ownership reduces the risk associated with owning a property as multiple investors share the ownership of the property. This reduces the financial burden of owning the property and ensures that the property is maintained in a better condition.
- Professional Management: Fractional ownership properties are professionally managed, which means that investors do not have to worry about the day-to-day management of the property. This ensures that the property is well-maintained and generates a consistent income stream.
- Liquidity: Fractional ownership provides investors with greater liquidity as they can easily sell their fraction of the property to other investors. This provides investors with greater flexibility in their investments and ensures that they can quickly liquidate their investment if needed.
Though it has many advantages, some of the disadvantages of Fractional Commercial Real Estate Investment in India are:
- Limited Control: Fractional ownership means that investors have limited control over the property. Decisions about the property are made by the managing company, and investors have to rely on the company to make decisions that benefit them.
- Potential for Conflict: Multiple investors owning a property increases the potential for conflict among investors. This can lead to disagreements about how the property is managed and how the income generated by the property is distributed.
- Limited Market: Fractional ownership properties have a limited market, which means that it can be difficult to find a buyer if an investor wants to sell their fraction of the property. This reduces the liquidity of the investment and makes it difficult to quickly liquidate the investment.
Return on this Investment:
Some of the companies operating in this model are Strata, Gayn Capital and Myre Capital. Myre Capital has been acquired recently by another company.
They offer returns starting from 8% and more depending on the property size and the lease period can go up to 9 years.
You can sell your holdings or investment value to anyone by anytime. Though it is recommended to stay invested for 3 to 5 years.
When you are selling your investment, you will get appreciated value. So, it is suitable for someone looking for regular rentals along with investment value appreciation.
Conclusion
Fractional ownership has gained popularity in India for commercial real estate investments, as it offers several advantages over traditional real estate investments. However, it also has some disadvantages that investors should be aware of. Investors should carefully consider these advantages and disadvantages before investing in fractional commercial real estate in India.
Fractional ownership can provide investors with access to premium properties, diversify their investment portfolio, and reduce the risk associated with owning a property.
About the Author
Ganesan Thiru is an Author, Stock Market Profit coach, Research Analyst who has trained more than 10,000+ people in stock market investments & had done 90+ webinars in the last 15+ months He has 1800+ people in his Private Facebook group “Unlimited Wealth” & active in social media. His mission is to inspire one million people in getting financial freedom.