The pandemic brought about lockdowns and central governments across nations loosened their purse strings. As more money crept into the system, interest rates for loans on real estate went to record lows. As India successfully embarked on one of the world’s largest ‘vaccination drives’ and the threat of the pandemic began to diminish, real estate across cities saw a major surge. The residential market for the top 7 cities recorded sales of over 62,000 units in Q1 2023, an increase of 15% sequentially and 20% y-o-y, across the top 7 cities of India. In fact, this is the highest quarterly sales in the last 15 years demonstrating enhanced consumer confidence despite the global headwinds
When the sparkling growth of an asset class comes along, an investor tends to pay attention. Many are feeling a sense of having missed the bus. The reasons could be that the real estate they selected or the ones that suit them may be out of budget even with the loans they are eligible for. While we do not want to delve into the reasons as it is best known to the reader/ investor, we wish to highlight fractional real estate investment as an asset class is increasingly becoming popular. Fractional property investment enables you to take exposure in real estate without the hassles of having to read through documents, scout for buyers, manage tenants, maintain, and repair the property, etc.
Fractional Ownership Real Estate – A well-balanced asset class
Murthy
The minimum investment to own a ‘fraction’ is INR 25 Lakhs. In a city like Mumbai, even a one-bedroom residential property will block almost twice the amount for you. Moreover, the fractions are derived from grade A commercial property that is managed by professional companies. With such reputed tenants and professional management of the properties, we can assume a 5-10% capital appreciation and an 8-10% rental yield annually. As per these metrics, the sum of the rental yield and capital appreciation would give you steady long-term returns at a target IRR of 13-20% over a period of five years. This is a much more lucrative investment option when compared to ‘Fixed Deposit’ which is a minimum-risk asset class with an interest rate of about 7% per annum.
Fractional Ownership is a great way to ride the real estate boom with almost all risk factors addressed. It can help you to sleep peacefully while your fractions make a good return over time. As per many reports on the state of the economy and real estate, the commercial and residential real estate boom is not going to fade away soon, and hence the time is ripe and right for fractional investing of grade A pre-leased commercial real estate.
