The previous couple of years made it clear to all those in doubt that fractional ownership is not just a real estate trend, or a fancy new toy for seasoned investors to play with. No, it is an investment model that is here to stay.
The Indian real estate investment market saw great growth in 2023. The market is currently valued at USD 265.18 billion (!) as per Knight Frank.
And the outlook looks even better for 2024. As per Knight Frank India Real Estate Report 2023, residential sales are expected to rise by 8-10%, approximately 3.5 lakh units in total.
Talking about commercial real estate, the JLL India Real Estate Market report for Q3 projected substantial office space absorption of about 45 million sq. feet in 2024, easily surpassing the benchmark set in 2023.
Similarly, Warehousing is set to grow healthily: 10-12% growth in warehouse demand, based on factors such as a growing e-commerce market and government backed initiatives.
Now what does this have to do with fractional ownership, you might ask?
How Fractional Ownership is Changing the Real Estate Sector
Historically, the real estate sector, especially commercial real estate, has come under the jurisdiction of the uber rich and high net worth financial institutions. High end commercial properties and real estate projects have eluded the broader investor base. These investors have found it difficult to invest in this asset class and enter the market.
Fractional ownership of commercial real estate has evened out the field to a large extent. It has allowed investors from all over the country to pool their money into premium Grade A commercial real estate, and partake in the profits: whether rental income, capital appreciation, or both.
And the market is growing. According to Knight Frank data, the market size of fractional ownership properties in India is projected to grow by 65 percent, from $5.4 billion in 2020 to $8.9 billion in 2025, at an annualised rate of 10.5%.
Per a Mordor Intelligence report, the fractional ownership market for commercial real estate is expected to bounce from USD 5.4 billion to USD 8.9 billion come 2025.
How Fractional Ownership Works
To those new to the concept of fractional ownership, here’s how it works: Basically, the fractional ownership model takes money from investors and pools it together. This money is used to buy ownership stakes in trophy commercial properties. The companies that offer this investment model are known as fractional ownership platforms (FOPs).
These high-end commercial properties are extremely valuable and would be difficult for a single investor to acquire. Whatever rental income or yields is derived from the commercial property, which usually has a high ROI, is shared proportionately among all the joint investors depending on their share of co-ownership; after the FOP takes a cut for maintenance of the property, of course.
Look at it as buying a large cheese cake with your friends and sharing a piece each, rather than just one person buying and eating it all.
How Fractional Ownership Removes Barriers to Entry
Reduced Entry Ticket
Certain high end commercial properties are so expensive that only high net worth individuals (HNIs) can buy an ownership stake in them. Fractional ownership turns this concept on its head. Potential investors don’t need crores of money to invest in fractional ownership models.
Most fractional ownership platforms offer reduced entry thresholds, and Assetmonk offers a minimum entry ticket of Rs 25 lakhs, and access to premium commercial real estate assets.
High Returns
Fractional ownership in commercial real estate offers attractive returns to investors in the form of high rental yields. Average rental income is projected to be around 8-10%.
Assetmonk can boast of having led 100s of investors to inclusive, and diverse commercial real estate investments, and boasting an expected IRR of 14-24%. Assetmonk provides a wide range of curated trophy commercial properties for you to choose from.
Having led hundreds of investors to inclusive, flexible and diverse commercial real estate investments; while boasting an expected IRR of 14-24%; Assetmonk has a wide range of quality curated trophy commercial properties for you to choose from.
Hassle Free Ownership
The fractional ownership platform (FOP) manages all aspects of property maintenance and ownership, leaving you to enjoy the rental yields and capital appreciation.
Increased Liquidity
Fractional ownership models offer increased flexibility and the option of a smooth exit. Assetmonk empowers its investors to divest their fractional ownership stake, and this allows for investors to have an exit option in case the need for liquidity arises.
Fractional Ownership in an Expanding Market
As the real estate sector and the commercial real estate market grows, so does the market for fractional ownership.
According to CBRE’s most recent report, the country’s commercial real estate market will grow from 37% in 2022-23 to more than 40% in 2023-24.
India’s commercial real estate market is thriving, particularly in major cities such as Mumbai, Delhi, and Bengaluru. The information technology, e-commerce, and startup industries are increasing demand for office spaces, retail establishments, and shared workspaces.
The rise in demand for office spaces and commercial spaces will also lead to an increase in the demand for fractional ownership of commercial properties.
Fractional ownership of luxury homes and holiday homes has also emerged as a crowd favourite. Many investors are excited at the possibility of owning a holiday home without paying full ownership costs. Fractional ownership models of holiday homes provide for around 8 investors to pool in their money, and each of them gets around 45-50 days of ownership of the luxury vacation home.
Similarly, after SEBI’s approval and legitimisation of fractional ownership, fractional ownership in the residential sector is also on the rise.
Invest in Fractional Ownership with Assetmonk
The bottom line is: fractional ownership is a paradigm shift. It has changed how we approach investment in real estate. Fractional ownership provides ease of access, potential for global growth, and technological advancements. It’s a cornerstone of the modern diversified investment portfolio.
As the real estate sector in India grows, platforms that prioritise transparency, due diligence, and an overall good experience for investors will come to the front. Assetmonk is one such platform. We’ve embraced our role in shaping the future of fractional ownership in commercial real estate in India.
Fractional ownership of commercial real estate is all set to become a mainstream investment avenue. Investors who embrace this model stand to benefit from a more accessible, flexible, and rewarding real estate investment experience in the years to come.
Platforms like Assetmonk facilitate access to these opportunities. We also contribute to the evolution of the real estate sector, and are ready to guide investors in their fractional ownership journey.
