Fractional Investments in Commercial Real Estate – Feasible or Not? With the global economic shift in the last few years, ample investment unconventional opportunities have opened up for the concerned investors. More than looking for strategies and stocks to earn a quick buck, individuals are now more focused on steady, long-term sources, especially sources that’d withstand themselves in the face of an economic stock. Whether you are looking for a promising retirement plan or to accomplish your financial aspirations, one option that seems more than favorable for the diverse crowd of investors is Fractional Property Investment specifically in the area of Commercial Real Estate, which only recently entered the Indian economy and has already escalated its position significantly. So, what is Fractional Investment? It is simply an idea where instead of investing a massive sum on some commercial asset, multiple investors unrelated to each other come together and invest in a property in proportionate equities. In this process, an SPV (Special Purpose Vehicle) is created which holds these equities for the shareholders to invest in and generate regular stable incomes, usually including an increment in value after a certain period (often 3 years).
Fractional Ownership is Gaining Steady Momentum as an Investment Avenue and here’s why Fractional Ownership in India may have only recently caught the craze of the Indian Market. However, this concept isn’t new for the global market. Countries like Canada, the USA, Japan, including countries in the Middle East have long seen the rise of Fractional Ownerships in CREs. Being a popular global trend in the investment market, it provides incomparable valuable advantages which have made it extremely popular among investors of all class incomes. That brings us to the most attractive factor about fractional ownership. While the real estate market for the longest part remained limited for individuals who’ve accumulated a certain amount of wealth, especially with CREs. However Fractional Ownership has
made it accessible for all, especially for middle-class individuals. You may be just starting off in your career, but you too can easily now invest in real estate.
Did you know fractional stocks in CREs even in the global market are available at greatly convenient amounts? For instance, you can choose to invest in one asset for 10 USD and at the same time invest in another for 250 AEDs. Imagine being able to invest in Grade A global commercial properties. Well, now you can. And why commercial estates are always a better option for investment than domestic assets, is because tenants usually tend to hold onto their commercial leases longer, especially since they put plenty of time and effort into making the space their own. In fact, they even tend to multiply their leases, leading to very minor to negligible gaps in your steady inflow of gains. In contrast to other asset classes that are volatile, primarily because they are linked to stock markets, the real estate commercial sector offers investors a sufficient level of risk mitigation. Indeed the market of fractional ownership in India is still evolving. But the Indian market is also comparably more resilient than most markets, which is why it’s not just the young Indians that are investing in Fractional investment real estate, but also foreign investors. In fact, 30% of the current market is occupied by NRIs. After all, if you know there’s a resource that’ll regularly yield you a rental income of about 8-10% with a promising IRR of around 20% every five years, it's a given that individuals looking for stable income sources would be drawn here. Hence, this steady surge in fractional ownership in the Indian Economy seems only reasonable.
Outlook The Fractional Ownership model still has a long way to go, however, the advantages it offers are too valuable to ignore. And if you are worried about transparency and other security issues, technology-enabled services have already resolved most of these already for you. Especially in the post-pandemic scenario, there’s not much that tops what it brings to the table including reduction of investment portfolio risks and appropriate diversification and as a result, improved
steady gains. Student Living, Senior living, Co-living, resorts, warehouses, industrial spaces, resorts, etc. seem to be some of the promising options in this scenario. Although there is the pertaining inconclusive debate whether it is wiser to invest in REITs or Fractional Ownership. It is wiser on the investor’s end to do their research and discover which aligns better with their goals and aspirations.
About the Author: Yield Asset Yield Assets is one of the best commercial property investment companies that provides the best real estate investment platform. Investing in pre-leased commercial property is one of the best investments that one can rely upon.