Now you can buy property in fractions

Bite-sized pieces of real estate are now available for the investor who has limited funds and does not want the hassle of loans. For a few lakhs, as low as Rs 5 or 10 lakh, you can be a “fractional owner’’ of a real estate property.

The concept of ”fractional ownership’’ of property is being popularised in India by start-ups like Property Share and RealX.

 Manish Kumar, co-founder and CEO, RealX, says, ”Fractional ownership gives an ability to several unrelated parties to share in, and own a high-value tangible asset which otherwise is a lot expensive if bought by individuals. All other assets can be bought in smaller sizes but not so in the case of property. RealX will provide buyers an option to purchase property in smaller amounts and, also, facilitate swift execution through digital transactions.’’

Kunal Moktan, founder and CEO, Property Share (www.propertyshare.in) says, “Property Share is a platform that allows investors to purchase rent generating properties in smaller bite sizes of Rs 5 lakh each and receive monthly rents and capital appreciation in proportion to their ownership.’’

Fractional ownership offers the opportunity to add real estate to your investment portfolio at a fraction of the original cost.

Besides, it offers investors the opportunity to invest across geographies too. But there may be downsides that come with joint ownership of property. For instance, administrative hassles are likely to crop up due to multiple owners at the time of registration, etc.

In the REALX model, “The properties are registered in the name of a representative who acts as a trustee on behalf of the investors. Stamp duty is not payable on part sale / transfer of rights as of now since the registered owner on record is still the same,’’ explains Kumar. Financial planner P V Subramanyam feels it may be a better option to buy a smaller property with full ownership rather than opt for fractional ownership.

Industry sources say that joint ownership (between known parties) is a common practice in case of commercial premises. Since returns from commercial property is in the range of 8-9%, these are more attractive than the residential segment where the returns are in the region of about 2-3%.

Sources feel that except for capital appreciation, fractional ownership does not offer any value proposition.

“After the maintenance fees and property taxes, the net yield comes down drastically,’’ say sources.

COST NO BAR

  1. Fractional ownership offers the opportunity to add real estate to your investment portfolio at a fraction of the original cost
  2. Besides, it offers investors the opportunity to invest across geographies too. But there may be downsides that come with joint ownership of property
  3. Joint ownership is a common practice in commercial premises due to returns ranging from 8-9%, making it more attractive than the residential segment

Credits DNA

 

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