Fractional ownership is the next big wave in investment-tech. It is not only opening up newer avenues for mom and pop investors, but also making instruments previously only accessible by HNIs, affordable. Real Estate has equipped ages of investors with wealth. In any case, it has usually been held for those with detailed information, the correct associations, and admittance to an immense measure of capital. This has continued putting resources into Commercial Real Estate (CRE) far off for most until a couple of years prior. In any case, to have a sincerely necessary edge, individuals need to comprehend that CRE ventures are a vital piece of their portfolio.
The substantial aspects that are basic in the most well off people and isolate them from the rest are their Real Estate ventures. Additional, their pay isn't allied to their time went through working and they centre on income through Real Estate. These bits of knowledge assume a pivotal part in changing the manner individuals put resources into the CRE area. Subsequently, as an answer for have particular information, the correct associations, and admittance to an enormous measure of capital; Fractional Ownership is the obligatory change going to the CRE market.
Conception of Fractional Ownership
There occurs a quality commercial building worth 50 crore, engenders good cash flow and is a leased asset to a verified institutional-grade tenant. Aleksa (a new age investor) is looking to participate in the kind of asset with all the above said features but only wants to do it with just 25 lakhs.
Traditionally, 25 lakhs wouldn't allow Aleksa to invest in individual institutional-grade properties until Fractional Ownership. It enables to divide the 50 crore worth assets into fractions or shares that represent equity and debt in the underlying asset. It means that this asset can now be accessed by a wider pool of institutional investors, individual investors, and fractional investors like Aleksa. Hence, enabling the new age investors to participate in new opportunities at a fraction of the cost previously required
Investing in a CRE opportunity is the choice of knowledgeable investors than any other opportunity. This is since stock markets are unstable and banking products like Fixed Deposits give capital protection but with low returns if interrelated with the rise economics. Thus, the investors prefer to invest in CRE as the opportunity delivers a balance of these features, has a physical underlying asset, the capability to preserve capital and generate monthly or quarterly cash flow as well.
Fractional Ownership is a model that has been in existence in various developed economies like America, Singapore, and Hong Kong and is now gaining traction in India. The fractional ownership platform delivers a portal where individuals can get together to purchase an asset, enjoy the yield it generates and finally be able to sell their fraction when they want, thus enjoying capital gains. The platform also manages the asset and simplifies any pay-outs from the asset and automatically distributes these pay-outs to fractional owners like Aleksa.
In simple terms, Fractional ownership enables a person, to own a fraction of a pre-leased asset worth 50 crore, with a small capital size of 25 lakh, and enjoy the financial privilege like that of a 50 crore asset owner such as an institutional-grade asset, verified tenant, and a cash flow.
Fractional ownership helps in creating a diversified portfolio that distributes and minimizes the risk. Now with just 1 crore, an investor may buy four different kinds of assets, at four different locations with the assistance of people having specialized knowledge and vast experience, to manage the asset while working on behalf of them.
Aligned with the message of technology i.e. empowering people to create financial futures, and, fractional ownership, is driving equality and transparency. With PropTech platforms for Fractional Ownership, people enjoy easy access to thoroughly vetted, post-strict due diligence, stabilized opportunities in an institutional-grade physical asset having a predictable cash flow.”
Entering into the commercial real estate segment has always seemed difficult for people having small capital available or planning to diversify the portfolio. However, with Fractional Ownership, people will be able to overcome the barriers of high capital requirement, lack of experience, and liquidity.
(Varun Mohan is Founder, Definite, a proptech startup)
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