In India, real estate property is the one thing everyone wants to invest in. We tend to save up our whole lives' worth of money so that we can buy our dream property one day. This is not only a very big dream, but also an old-fashioned and impractical way to spend your hard-earned money. A modern way to invest in real estate is through fractional ownership, which means that investors can buy high-end properties for a small amount. It is slowly becoming the modern real estate investment platform.
What Does Real Estate Fractional Ownership Mean? Why Is It Becoming More Popular?
An investment strategy known as fractional ownership of real estate involves a group of individuals pooling their resources to raise money for the joint purchase of the real estate. Each investor gains a portion of ownership in the asset. It is the best type of investment since everyone who invests shares the costs, earnings and financial responsibilities associated with the property.
Due to the high rate of asset appreciation, real estate investments have always been lucrative. However, most investors cannot access this asset class because real estate demands lots of capital. Private yachts, Special Purpose Vehicles and other high-end investments are made possible by fractional real estate ownership, which enables investors of all financial levels to invest in assets for personal and professional purposes.
As more and more MNCs establish bases in India, the market for fractional investment in commercial real estate is anticipated to expand in that country. Also regarded as one of the best financial choices for senior citizens is fractional ownership.
Fractional Ownership Models
Joint Ownership of Asset
· The right to use the fractional property belongs to all owners.
· They can do so without impairing the rights of other investors.
· With the agreement of the other co-owners, a co-owner is allowed to sell their stake at any time.
· A cooperative society is established by a group of interested investors to make purchases of assets on its behalf.
· Members of the society and fractional owners of their homes are requirements for all investors.
· A fractional owner's shares will be transferred to the new fractional owner if they decide to sell them.
· In this investing strategy, investors establish a corporate framework before buying assets in its name.
· The business must abide by the rules and requirements of the Company Act for each of its subsidiaries.
· While a company model reduces stamp duty, it also involves other duties.
· Here, a single trust is established by all interested parties, with the property seller serving as the trust's creator.
· For the benefit of all fractional owners, the seller performs the deed following the detailed instructions.
Taxing Fractional Property
Many taxation regulations do not yet exist because fractional ownership is still in its early stages. Still, the government could implement certain tax consequences if the investing strategy becomes more popular.
Fractional Ownership in Commercial Real Estate
The CRE concept for commercial real estate aims to provide partial ownership of tangible assets. These consist of Grade-A commercial real estate that MNCs lease, such as banks, warehouses, factories or other IT facilities. In most situations, they already have tenants. Unlike in residential settings, commercial tenants are less likely to quit their premises suddenly; instead, a facility may be occupied for more than ten years by the same company. Not only that, but an MNC would almost always pay rent on time and maintain the property well, leaving the investors with a substantial return. Fractional ownership makes these properties available to smaller investors.
Fractional property investment is growing in popularity in India for retirement planning and passive income. Land ownership ensures stability and status in the community's higher strata. The most stable asset class has become limited owing to population growth.
CRE is a great investment since it creates a regular rental cash flow, but it needs a lot of money and strong connections; hence, HNIs or Ultra HNIs own and regulate CREs. Middle-class communities never experience the same returns, but fractional ownership can enable you to invest in high-end commercial real estate for a fraction of the original price and enjoy owner privileges.
You can buy a part of a 100-crore CRE for Rs. 25 lakhs. Due to the low minimum, people from diverse backgrounds can invest.