Fractional ownership has emerged as a new way of investment in commercial real estate with around Rs 350 crore worth of deals transacted in the last one year. Investors are looking at Mumbai, Pune, Bengaluru, and Hyderabad markets favourably, JLL said in a report.
In the last five years, fractional ownership companies have done transactions worth around Rs 750 crores across the country.
“Fractional ownership companies have created a new set of opportunities for retail investors. Despite the COVID-19 impact, out of the total fractional ownership market, approximately Rs 350 crores worth of deals have been transacted or in the final stage of conclusion in the last one year alone. These transactions are mix of office and warehousing deals,” said Vishal Ahuja, India Head, Private Health Group, JLL India.
HNI’s and Family Offices see merit in investing their money with a professional setup wherein they get access to some of the best properties with good tenant profile. Like the West, this concept is gaining acceptance here with investors willingness to embrace the shared economy”, he said.
The model is also gaining popularity with young Indians who are looking at availing benefits of this ownership; Grade 'A' premium properties, portfolio diversification, capital appreciation, higher liquidity and superiors’ ROIs.
“Transparency along with increased use of technology is another reason for high level of acceptance. Transaction details like deal specific documentation is shared with investors. They also provide a dashboard access to investors for tracking their investments. All these factors have a positive bearing on the entire process, Ahuja adds.
Fractional ownership is a new alternate means of investment in commercial real estate apart from REITS and is gaining prominence due to long term investment into a stable asset class with high returns, convenient way of investment with no hassles of managing the asset and ease of exiting the investment. Potential benefits with fractionally owned property also tend to be longer than with timeshare, and the size and quality of fractional ownership properties are getting better, with superior access to facilities and services.
Apart from the office space as a primary focus segment, warehouse and industrial parks is another such asset class which is likely to attract fractional ownership companies, with the increasing demand of warehouses to cater to the needs of the expanding e-commerce industry and challenges in terms of last-mile delivery and incremental cost of maintaining forward distribution points.
Majority of young investors aged between 30-50 years in Tier I and Tier II cities are looking at opportunities to invest in Grade A assets with diversified use that offer attractive yield in a short period of time with low risk, high transparency and are economical and convenient.