The word investments would raise the topic of the stock market, mutual funds, or cryptocurrencies. However, there is another solid and not-so-scrutinized route for smart investors that’s quietly gaining momentum: Fractional Real Estate Ownership.
This concept falls between a direct ownership of property and REITs, hence serving as a middle ground for those desiring to enter real estate investing without bearing the full weight of ownership.
Someshwar Srivastava, a veteran in the Indian real estate PR sector, presents a strong case for this new-wave investment concept. Srivastava’s in-depth knowledge of real estate markets may offer an intelligent perspective on how fractional ownership might transform the investment landscape in a country like India.
Fractional Ownership of Real Estate
This is at the heart of what fractional real estate ownership is-the group purchase of a property by multiple investors. This means that each investor owns a fraction of an asset and enjoys and benefits, in terms of income produced by the asset, according to his percentage of ownership. Therefore, this model will allow an average investor to invest in high-end properties that otherwise would be out of reach.
You may be a flat owner of luxury apartments in South Mumbai or a commercial complex in Bengaluru. Pooling together is not a requirement for the total investment amount you need for the purchase. Sharing the costs, risks, and benefits with other investors occurs.
Here’s why this model is gaining steam.
Why Traditional Real Estate Investment Can Be Limiting?
Property investment, more so in developing urban centers, can be regarded as a sure way of building long-term wealth. However, the traditional method of real estate investment has some important limitations:
1. High Entry Barriers: It is very expensive to buy a property in a place like Delhi or Mumbai or Hyderabad. In most of such cities, it is utterly unaffordable to own a property because prices have skyrocketed.
2. Management Hassles: Owning property isn’t just about the initial investment. Ongoing maintenance, legality issues and property taxes add a layer of complexity, especially for rookies in the field of investing.
3. Concentration Risk: Buying a single property puts all your money in one place. If the market crashes in that location, your entire investment could take a hit.
This is where fractional real estate ownership shines.
How Fractional Ownership is Beneficial?
1. Diversification: The investor could diversify his portfolio by spreading the risk over various locations and properties. For example, owning a fraction of several properties in different cities instead of owning an entire apartment in Gurugram further diversify the exposure of market fluctuations in one particular area.
2. Potential for High Returns: High-end commercial and residential properties tend to build up in value at a faster rate than more modest, low-budget assets. There is also a chance of getting rental income through property appreciation and steady income flow.
3. Liquidity Options: While fractional ownership still isn’t as liquid as stocks, some platforms facilitate buying and selling fractional ownership stakes, making it easier to cash out when needed. This provides an exit strategy not commonly available in traditional real estate.
4. Common Management: Most of the fractional ownership programs provide professional management of the property. The routine matters-the maintenance, tenancy issues, and payment of taxes-are dealt with by the management. You do not bother about these things because they have been taken care of.
5. Tax Benefits: In any case, such an ownership would include tax benefits. You may even claim a depreciation on your part of the property in some jurisdictions, thus lowering your taxable income.
Someshwar Srivastava on Fractional Real Estate
Someshwar Srivastava, with more years than he can count in real estate PR, believes it’s not a fad but the future and how we conceptualize property investment. He recently said in one of his talks that this model is the need of the hour for cities like Mumbai where no middle-class person can afford to even think about owning a house with the cost per square foot.
“Fractional ownership democratizes real estate investment,” notes Someshwar Srivastava. It affords an opportunity to people to own fractions of high-value assets otherwise not accessible to them. It is pretty attractive, especially to young investors who may not have a solid financial background to buy full property but at least enjoy the appreciating value of real estate, he adds.
How Technology is Enabling Fractional Ownership
Srivastava is particularly on point when referring to tech-driven platforms. Several platforms emerge as intermediaries for fractional real estate investing. They list properties, facilitate transactions, and provide transparency concerning rental income and property appreciation.
These platforms have made it easy and easier to invest in just a fraction of a property. It has been able to eradicate a lot of the old pain points associated with real estate investment, from the verification process on the lawfulness of the property to the fair division of profit.
The Global Scene
Fractional real estate is in the process of gaining its treads in India, but more mature markets, like those of the U.S., Europe, and the Middle East, define a well-known investment strategy. In these economies, fractional ownership does not apply only to residences or commercial properties but extends to vacation homes and high-end resorts, even infrastructure projects. At this point, India is gaining up, with domestic and international investors expressing very good interest. Increased market competition could make it even more easy to penetrate for new players because entry barriers reduce. This should make it even more attractive to first-time investors.
Challenges to Watch Out For
As with any investment, fractional ownership is not risk-free. For example, one key issue is liquidity. While some platforms might provide some mechanism for selling your stake, finding an interested buyer who could buy a fraction of a property is quite time-consuming, particularly at low market tendencies.
Disputes: Co-owners can create potential drawbacks through disagreements around selling or remodelling the owned property. Most fractional ownership models have legal agreements that address such cases, but differences do develop around those decisions.
Conclusion
The Future of Fractional Real Estate Ownership Fractional ownership of real estate, therefore, is nothing but a once-in-a-lifetime combination of affordable entry, diversified investments, and high returns in the changed landscape of investment.
It democratizes access to prime properties, thus making people part owners of assets that were otherwise out of their league. This model would perhaps make a new definition as Indians look at investment in property, as Someshwar Srivastava aptly put, “It is not an alternative, but the way for long-term creation of wealth in a sustainable and accessible manner”.
In a way, fractional ownership is an attractive proposition for the investors who wish to reach out for real estate but not necessarily all at once and put all their money on the table. Technology will only carry on driving transparency and access. This can prove to be the future of investment in real estate for generations into the future.