Table of Content:
- Benefits of Fractional Ownership
- Difference Between Fractional Ownership And REITs
- Points To Remember Before Investing In Fractional Ownership
- Fractional Ownership: Why Is It An Emerging Trend?
Fractional ownership in real estate is the partial ownership of expensive commercial properties. It is owned jointly by a group of investors who invest a particular amount and
Benefits of Fractional Ownership
Even after being a new class of investment altogether, fractional ownership is a growth-centric investment opportunity. Here are a few benefits of fractional ownership you can get if you are an investor:
It offers you excellent returns on investment as these properties have a high appreciation potential.
It offers a Grade A property investment opportunity.
It lets you diversify your portfolio apart from traditional investment options like FD, Bonds, Stocks, and Gold.
It enables handsome returns.
It gives the freedom to choose your share of the property
Difference Between Fractional Ownership And REITs
Real Estate Investment Trusts(REIT) are one of the alternate investment instruments in real estate. It enables a way to invest in real estate without buying a property.
Let’s find the difference between Fractional ownership And REITs:
| Fractional ownership | REITs |
Fractional ownership does not fall under the purview of SEBI | SEBI monitors REITs directly |
The investor is allowed to invest in under-construction as well as developed properties without any barrier | The investor has to make 80% of the investment in well-developed and income-generation properties |
Investors get the flexibility and full control to choose the properties in which they want to invest | Investors have zero control to choose the type of property in which they can invest |
The investors are charged maintenance costs and brokerages | There are no upfront maintenance costs and brokerages that are charged to investors |
The minimum investment is around INR 25 lakhs | The minimum investment is as low as 10 to 15 thousand |
Fractional ownership has higher income potential but returns are fluctuating | REITs are very liquid and offer consistent returns to the investor |
Points To Remember Before Investing In Fractional Ownership
Here are a few points you need to remember as a retail investor:
Do a thorough research and background check before you select a Fractional Ownership firm or partner. Check the background of key investors and their financial positions.
Make sure to check if the facilitator has permission to be a fractional investment opportunity provider to avoid any chances of fraud. Do a proper background check of the facilitator too.
Look for an opportunity that has tech-enabled management and the investment can be tracked online. Make sure to check for exit options and any hidden clauses.
Try to get maximum discounts as there's room for price accommodation.
Fractional Ownership: Why Is It An Emerging Trend?
Investors continue to look for different avenues for investment in the post-covid world. Real estate has been one of the consistent & favorite investments among them. But the complex processes and higher prices have kept investors away from investing in expensive real estate properties.
This is exactly where fractional ownership came into the picture.
Commercial real estate has been a playground for wealthy investors and large corporate entities. Hence, middle-class investors were incapable and hesitant to invest in such large commercial projects. Fractional ownership lets every kind of investor participate in this market and reaps their benefits.
More opportunities for fractional ownership ensure a higher demand for commercial or residential real estate. It will encourage the developers in the real estate sector to bring in projects that are built for this model. Fractional ownership also allows the brokers and real estate mediators to earn revenue making it a win-win situation for everyone involved in it.
Conclusion
Fractional ownership is a new concept in the Indian real estate scenario. So, we hope this blog helps you understand what this new alternate investment funding instrument is at its core. While there’s a lot more to discover about it, start planning for your first fractional ownership by creating a checklist today!