Are you short of capital to invest in real estate? Worry not! Now, with fractional ownership of homes, a fairly new concept in the Indian residential market, anyone can be a property owner!
Owning a property in India is equated to almost spending all your life long savings. It is a dream that is common among a large chunk of the Indian population. However, real estate prices have witnessed an exponential growth in the last decade or so making it an extremely daunting task for an individual to buy property in India.
Real estate enthusiasts look at the sector not just for having a shelter above their heads but also as a potential investment option. While, buying a home may remain an expensive affair, you can now, at least, invest in the realty sector without worrying too much about the capital. How? Read on!
If you have been desperately looking to put some money in real estate as an investment but have been pulled back due to the high cost involved, worry not. If you cannot afford to buy a property, you can now own a portion of it!
What is Fractional Ownership of homes?
Welcome to the world of ‘fractional ownership’. The concept, fairly new to the residential sector, allows one to invest partially in a property along with other investors. Co-ownership of properties is quite common in commercial real estate. However, investment in commercial requires a larger capital as the tickets sizes are bigger. It is out of bounds for the common man.
With fractional ownership taking shape even in the residential sector, individuals now have an option of becoming real estate investors with a capital as low as Rs 2-5 lakh. Earlier, fractional ownership in residential sector was largely un-organised. However, now start-ups like Bengaluru-based PropertyShare.in are making such transactions more organised. "Owners can invest as little as Rs 2-5 lakh to own a fraction of the property. For a property worth Rs 1 crore, an owner can invest 5 lakh and own 5 per cent of the property along with other like-minded owners, says, says Kunal Moktn, CEO and Founder, Propertyshare.in.
How beneficial is it for realty investors?
Such investment platforms allow you to put your money in a property along with other investors. Depending upon the number of people interested in a given property, one can either get a joint ownership in the property or a stake in the company that owns the property. You sign a shareholders agreement and an investment agreement that state your investment amount and fraction of ownership you hold. Your liability is limited to the capital invested in the property, he adds.
Investing in residential real estate gives an opportunity of not just capital appreciation but also rental returns as it is easier to lease out residential properties as compared to commercial properties. Also, investing in residential does not carry high risk as it is always easier to re-sell such properties as compared to commercial inventory. "While this might not be a solution for those looking to buy a home for personal use, fractional ownership makes tremendous sense for better risk adjusted returns. Commercial real estate offers low liquidity and has longer lease tenures of 9-15 years," Moktan
While, fractional ownership does open the doors for many who have always wanted to invest in real estate but were unable due to lack of capital, Satish B N, Executive Director, South India, Knight Frank, adds a caveat. “Even though the concept allows one to enter the realty sector with a smaller investment, one must be aware that annual appreciation might not exceed 10-15 per cent. This needs to be divided among the co-owners. Also rental returns in the sector are usually to the tune of 3-4 per cent only.”
As organised fractional ownership is still a novel concept, its future in our country is still uncertain. However, it certainly does offer an opportunity for the common man to make an investment in one of the most coveted assets available today.