What is Fractional Ownership in India?

by | Mar 17, 2022 | Real Estate | 0 comments

Everybody wants to own a property of their own. But buying a brand new property is a costly affair, something that bothers a lot of new home buyers. And perhaps that is why you would see a lot of people in India work tirelessly for their entire life so that they can save enough money to afford a luxury property after their retirement.

But what if I tell you that you don’t have to work for your entire life to own a property. Won’t you be astounded if you can claim the ownership of your desired assets in a much more convenient and affordable manner? What if you could buy a fraction of your preferred property, at least if not in its entirety, and still extract rental revenue from that particular fraction of property. Truly Amazing! Right?

The concept of fractional property is new to India, yet it spreads like a fever across urban societies. It is a new way of becoming an owner of your dream property that you have been eying for quite a long time. Read the following blog and learn about the intricacies of fractional ownership in India.

Defining Fractional Ownership

In the case of fractional ownership, a group of real estate investors or a group of property buyers can come together to pull out adequate funds to buy a property in its entirety while sharing passive ownership terms and conditions for high-value real estate. This kind of property ownership significantly mitigates the overall financial burden of a single investor, provides a golden opportunity to own a property on a cumulative basis, and allows the investors to earn a decent return on investment.

Types of Property that Can be Fractionally Owned

  • Commercial properties
  • Residential properties
  • A yacht & Jet
  • A warehouse
  • Vehicle & Equipment
  • Leased furniture

Quintessential Facts that You Must not Undermine

  • All the investors, you will also have to share the overall income and expenses arising out of the ownership of that asset, and that too at a correct proportion, based on their initial shares of investments.
  • As per the current market trends, the minimum investment you need to own assets like vehicles & equipment can be as low as 20k.
  • On the other hand, the minimum investment required to obtain fractional ownership of a commercial property can be as minimum as ₹5 Lakh.
  • A Specific Purpose Vehicle (SPV) is there to carry out owning fractional ownership of a commercial property. SPV is a financial vehicle that allows investors to raise funds and provide means to manage a fractional property. And as an investor of a fractionally owned property, you will get the ownership of shares of the SPV holding the property.

Why Choose Fractional Ownership?

  • Fractional ownership is the best option to choose when you have to own less liquid assets, hard to manage not affordable for single or small investors.
  • Owing a high-value asset would automatically put you in the limelight and portray your image in bright light. As a result, people would start following you and your actions, creating a more significant trend and better reputation and public image without making the total investment.
  • The total amount of money you invest in owning a fractional property gets dispersed further into net distributed cash flow.
  • Unlike other kinds of investment, No extra charges will be levied on your investment by a fractional investment company, except for some small and reasonable fee.
  • Fractional ownership is way more profitable than the conventional style of investments, as the investment becomes mature and stable over time.
  • While dealing with fractional property, you must wait for at least five to eight years so that property.  Values get appreciated over time. Meanwhile, you can also sell your shares before this maturity period.

Drawbacks that You Must know 

  • Ownership of a fractional property does not guarantee any income certainty, like what you get in bonds and shares.
  • The chances of getting scammed or deceived or the probability of fraud cases are not less here. So be very careful of where you are investing your money.

However, if you are interested in real estate investing, you can also take a look at the Godrej Properties in Noida. Godrej is a reputed real estate firm in India, and they have come up with a large variety of investment options in the residential and commercial segment.