NRIs are constantly looking for new yet safer ways to invest. Common questions include where to invest, how profitable it will be, and how secure it is to put money in an investment vehicle. Some invest in the stock market. But it is a well-known fact that stock market earnings are dependent on market sentiments and fluctuate with market volatility, as witnessed in the current pandemic crisis and the war. But, this is not the case with fractional ownership. Real estate fractional ownership is indeed one of the safer investment options.
A diverse portfolio is the need of the hour. Hence well-chosen CRE assets provide investors with a favorable risk-return profile. Such assets offer a compelling opportunity to access high-yielding and collateralized fixed-income investments. Furthermore, CRE has experienced a yearly appreciation of 11.6 percent in India over the last few years. It allows investors to enjoy additional benefits owing to capital appreciation at departure. Thus, the guaranteed monthly rent and security render this investment vehicle equal to debt in terms of risk profile. But the return profile is comparable to stocks (17- 25 percent IRR) following capital appreciation.
But, wait! Are commercial properties not expensive? Are they not valued in crores? Not so sure you have pockets deep enough for that? Well, Fractional ownership to the rescue! Through fractional ownership, prime commercial property that would have been hard to acquire is no longer a dream. This asset type is accessible to ordinary middle-income people. Previously, Indian investors were more inclined to invest in residential real estate than commercial real estate. Commercial real estate (CRE) investing via fractional ownership also has distinct advantages over other generally favored alternative investments. It is an investment solution that offers monthly cash flow and allows investors to earn 8-10% predictable rental income protected by long-term registered tenancies with MNC tenants.
The profits and gains from fractional ownership of CRE are closely related to the asset’s quality and rigorous screening. A complete asset selection process is required to account for subjective and quantitative characteristics. These are becoming increasingly complex with the incorporation of advanced technologies such as ai, machine learning, and large data sets. Because of information asymmetry, it is now impossible for a retail investor to get this information and perform the necessary amount of due diligence and review. Identifying a solid asset in the real estate sector is equally hard as in the financial markets. But, look no further! Assetmonk is here for you! It selects investment opportunities in optimal areas to maximize the micro-market advantage, depending on personal financial goals such as capital appreciation and monthly income. Assetmonk also religiously follows a 100-step due diligence procedure through which properties get rigorously checked for all financial and legal compliance. There’s also another significant benefit. Asset-backed investments are available on Assetmonk. It implies that your money is safe and secure even if an unanticipated event occurs.
You may now invest in Grade-A commercial properties with as little as Rs. 10 lakhs via fractional ownership platforms like Assetmonk. They provide liquidity, transparency, and IRRs spanning 12 percent to 21 percent.
So, what exactly is this fractional ownership?
Fractional ownership permits you to own a piece of a real estate asset at an affordable price. This is achievable when a group of people combine their cash and purchase the property in sections. Proportion ownership of a property is fractional ownership. Individual shareholders get sold fractional ownership shares in the asset. They share the asset’s advantages, such as usage rights, revenue sharing, priority access, and lower charges. In addition, investors will divide the earnings made by this property according to the proportion of their investment.
Because of the possibility of fractional ownership, commercial real estate investing has become more available to the people population. Assetmonk, for example, tailors CRE investment options starting at Rs 10 L depending on individual objectives. These can include everything from capital appreciation to passive income.
Why should NRIs invest in Fractional Ownership of CRE?
- Affordability: A high-quality office space for sale in Hyderabad costs Rs 300 crore. In most cases, such an investment is only possible for HNWIs. However, with fractional ownership, one may now pay as little as Rs 10 lakh to become a co-owner of a property and receive rental returns ranging from 6% to 10% each year. An annual rental income of Rs 60,000-Rs 1 lac gets produced from such an investment.
- Less Volatile Asset: During the global lockdown, the commercial real estate market slowed but soon rebounded in Q3. As a result, passive income is a certainty for you. Net CRE absorption increased by 63% year on year. In addition, the percentage of new completions increased to 59 percent. Covid-19 caused a drop in worldwide real estate values. However, due to India’s intensive outsourcing business, commercial renting increased. International firms occupy more than 63 percent of office space leased in India. It should send a green light to Indians and NRI investors that now is the time to buy a piece of the fractional real estate market. Commercial property prices are likely to climb dramatically in the future years. Therefore now is an excellent time to invest in fractional ownership.
- Long-term Tenants: Tenants in homes tend to leave regularly, causing the owner to lose rental revenue until a new renter can easily get located. A business property’s lease term is three years. However, the lease can get extended. It simply assures you a steady income. This way, fractional ownership ensures safety for investors. Tenants in high-end properties include huge multinational organizations, banks, or information technology enterprises with enormous budgets. They never fail to pay their rent on time. Furthermore, due to the time, effort, and money invested in converting the flats to workplaces, such tenants usually prolong the rental contract.
- Rental Profit: Each month, rental income is put straight into the account. Unlike deposits, you need to wait for the investment to mature before you can benefit. Commercial property fractional ownership provides a high return on investment via continuous rental income and appreciation. In the last five years, commercial property investment in India has grown at a CAGR of 16 percent. Aside from the value growth, if you invest with a reputable fractional ownership business, you may estimate a 15% rise in rental income returns over the next three years. It is integrated into the rent agreement for future inflation protection, guaranteeing that your investments remain steady over time.
- High Liquidity: Commercial real estate is a rare resource since it is a hard asset. Its value grows over time and can provide investors with a reliable source of income, long-term appreciation, and portfolio diversity. Because of the increased inclination for rental office spaces, around 75-90 percent of total office space in India gets leased. Commercial real estate is a solid asset, and its returns do not swing with the market, making it a secure and reliable investment. Furthermore, the investment in fractional ownership is not locked up, and investors can quit whenever they choose, according to experts.
- Diversification of a portfolio: Investors with fractional ownership can select the property they want to invest in. You can ensure extra safety by diversifying your portfolio by purchasing different properties in diverse areas and sectors.
So, if you’re searching for a secure and long-term investment, consider investing in commercial real estate under the fractional ownership model. It indeed is a safe investment with good returns. It provides consistent and better returns than traditional investment options, which are erratic and deliver lower yields. Investors can also gain by owning a portion of diverse asset portfolios.
Santosh Kumar is a Professional SEO and Blogger, With the help of this blog he is trying to share top 10 lists, facts, entertainment news from India and all around the world.