Fractional Ownership Of Commercial Real Estate Is Reshaping NRI Investments In India

Latest News NRI investment in Indian real estate

Is it possible for an NRI investment in Indian real estate and commercial real estate? Or how can non-resident Indians invest in Indian real estate? Yes, NRIs can invest through fractional ownership, in short. It is the best investment for NRIs in India. NRIs are becoming increasingly interested in fractional ownership. It is anticipated to be the real estate industry’s future because it identifies the most critical problem with commercial real estate: the elevated cost of entry or investment required.

The phrase “ The privileged become wealthy, while the poor become worse..” is certainly familiar to you. This may be true in our nation, since HNIs are the only ones who have access to lucrative investment prospects like commercial real estate. Both high-risk stock markets and poor return provident funds were restricted to regular investors. Partially owned CRE properties have opened the CRE market to NRIs and regular residents alike since the emergence of fractional ownership. In India, a new concept called “fractional ownership” permits a group of investors to join forces, pool their resources, and purchase a commercial real estate asset. Assetmonk, for example, offers fractional ownership options for those who wish to invest. Assetmonk delivers high-quality A-grade investment possibilities for investors interested in fractional ownership and crowdfunding. They guarantee excellent liquidity, transparency, and returns of between 12 and 21%.

Firstly, what is this fractional ownership?

Possession determines Joe’s sole right to any property. Fractional ownership is owning a piece of the building as opposed to owning it solely. Indian commercial real estate currently is a very good investment in India. However, some obstacles prevent ordinary citizens from investing.

How does fractional investing work? For example, an office building valued at Rs 30 crores is in Hyderabad’s prime location. Now, because it requires a high capital investment, only HNIs can invest in it. That property offers numerous advantages. It is also a secure investment option. But, an average person with just Rs 9 lacs cannot invest. But would it be possible if people came together, pitched in some money, and invest in an office space? So, everyone will get a portion of the property, and divide the bills and the earnings as per their contribution. The value of the office space will rise. And everyone who invested will reap rental income returns and capital gains.

This is real estate fractional ownership. It aims to enable anyone with little money to invest and own any commercial property. Like everything else, fractional ownership pros and cons also exist.

Is there a market for fractional ownership of CRE in India?

Financial Express states that commercial real estate fractional ownership in India is steadily on the rise given that the commercial estate market is anticipated to rise 13% -16%. This could be driven by the increased office space demand and the rise of large investors. These could contribute to significant capital appreciation.

Commercial estate properties are usually rented by banks, MNCs, and IT firms with big budgets. These tenants do not leave the property on short notice. Thus, this is an advantage for the owner. A commercial space lease agreement is for 3 years or more. As a result, this is a big advantage of investing in fractional ownership and leasing property to well-established organizations. They are punctual with their rent payments. They would also rather renew the lease than relocate.

What are the fractional ownership benefits for NRI investment in real estate?

  • Affordability: There is an office space that is purchasable for Rs 100 crore. It sure is a major investment and out of reach for most of us. Not surprisingly, the people who would invest in that office space would only be the HNIs. But you and I can now invest and become an owner of the office space by only contributing Rs 10 lacs. That is what we call fractional ownership. Commercial real estate fractional ownership will fetch you  6% to 10% returns from rent yearly. So, you can expect to reap Rs 60,000-Rs 1 la annually.
  • Growing market and stable asset: Commercial real estate had a minor slowdown during the nationwide lockdown in 2020. However, it quickly recovered. Real estate took a hit in major cities globally following the pandemic outbreak. But industry experts report that office leasing continued to grow in India because it has a strong outsourcing sector. International corporations account for more than 63 percent of office space leased in the United States. This should be a green flag for investors to start investing in real estate. The CRE markets are also on the rise.
  • Long-term tenants: The renters in a residential building would always leave. So, this can cause a shortfall in the rental income for the owner until a new renter occupies it. But, the renters of office space do not vacate easily. Thus, the lease would go on for three years and can also be extended. Grade A properties are usually rented by banks or MNCs. Also, they do pay the rent timely. The majority of tenants renew their lease due to the effort and money it took to turn a property into an office. But, it is always advisable to put your money in an already leased property to better maximize returns.
  • Returns: If you ever invest in bonds, you have to wait for the expiration of the lock-in period before you can celebrate your profits. However, with fractional ownership, this is not the case. Each month, the rental income returns will be transferred directly to your account. Furthermore, it guarantees a rising return rate on rental income yield and appreciation. For the previous 5 years, commercial property investment in India has provided a 16% CAGR. Aside from the increase in capital value, you can anticipate a 15% rental return increase for three years provided you invest with a credible real estate company like Assetmonk. This 15% rental return increase is also included in the tenancy agreement. It only helps to shield your returns from inflation in the coming years. Thus, it guarantees the solidity of your investments.

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