IS FRACTIONAL PROPERTY INVESTMENT THE NEXT BIG WAVE? Fractional ownership is a model that has trapped up in various developed economies like America, Singapore and Hong Kong and is now gaining traction in India. This system is poised to reduce the financial burden on a single investor or owner of the property. Amidst digital transformation of every business sector, technology has also transformed the way of investing in fractional ownership for millennials. Real estate has equipped ages of investors with wealth. In a country that India is, ownership of land is considered one of the significant class symbols that ensures your position in the uppermost strata of the community. Commercial real estate usually involves Grade A properties that are often leased by MNCs, Banks, Warehouses, Factories or IT establishments with a considerable budget. A rental lease for allocating commercial spaces is three years long or even more. Also, the property being leased for commercial purposes, they put all the efforts to keeping the space organized and more likely to renew their lease instead of looking to set up an office somewhere else. Seeing a monthly bank account credit and constant increase in market value of a property, results in many interested parties to go for fractional investment in commercial real estate. FRACTIONAL OWNERSHIP Vs REAL ESTATE INVESTMENT TRUST (REIT)- WHICH IS BENEFICIAL? Investment and risk go hand in hand. At present, commercial real estate (CRE) is experiencing high demand considering its ever-increasing market value. With the concept of REIT and fractional ownership, an average citizen can purchase a part of CRE and gain monetary benefits generated by monthly rental income or the interest generated on the security deposit amount. Real estate investment platform looks entirely different in today’s day and age. REIT is a lot like mutual funds. It’s pool money goes forward to invest in profitable real estate on your behalf. Such properties are leased out to businesses, through which the part-owner gets their share capital. But on the downside, these do not allow you the freedom to pick the property to invest in. On the other hand, Fractional investing real estate caters to your choice of property. First, the fractional ownership platforms list the CRE property that investors might be interested in and can check out; based on market price of each property, the minimum ticket size or fractional real estate investment is decided. Finally, based on ticket amount, you are free to choose the number of portions you want to own. ALTERNATIVE TO REITs Property funds and REIT were the only options for fractional investment in property until lately. Then there were stock exchanges for fractional residential real estate investment platforms. But here is another option for investors offering the potential for attractive risk-adjusted returns. Invest in institutional quality private real estate debt, underpinned by property assets.
Yield Asset aggregates investors to provide private debt to developers and property rich commercial borrowers. By allocating funds to private debt as an asset class you are effectively acting as the bank and like any other lending agency, the product is designed to provide a return on your capital in the form of monthly interest payments made by borrowers. The moment you invest in private debt, you reap the benefit of a fractional investment backed by real estate security, with a predictable monthly return. COLLABORATE WITH A DIVERSIFIED FRACTIONAL PLAYER Yield Asset and options like them can leverage the benefits of diversifying risk according to your appetite, with first mortgage security across residential, commercial and retail property assets. And absolutely Yield Asset is the right fit if you are in search of higher yield or ROI. As a fractional player, you have a smaller capital outlay and the benefit of detailed due-diligence. Just as Yield Asset provides 360 degrees view of the true valuation of the asset underpinning the deal. As is the famous saying, “The rich get richer, the poor get poorer”. This typically predicts the accurate investment options in our country, where promising opportunities like CRE could only be afforded by high net-worth individuals (HNI). However, with the introduction of Fractional ownership, the CRE market has been democratised and can now reach the average citizen. Already prominent in the west, fractional ownership is a new yet promising concept in India that allows for multiple investors to come together, pool their money and buy CRE property. The path of fractional investment is becoming mainstream and is connecting investors with opportunities they might otherwise not be aware of. With fractional investment platforms like Yield Asset amid others, access to quality deals is now on the table for most market players than ever before.