A silent revolution has slowly been gaining ground in the bustling world of Indian real estate. Investors who are ahead of the wave have already quietly taken their stand, and many others are quietly intrigued by the prospect of fractional or co-ownership of commercial real estate.
Based on current estimates by Business Standard, India’s housing market is predicted to soar to the dizzying heights of $1 trillion by 2030. And one of the main catalysts for this growth is the rise of alternative investment models:
Fractional Ownership: What Do The Numbers Say?
In recent years, there has been a huge surge in the fractional ownership market: The market has jumped from Rs 1500 crore in 2019 to an eye catching Rs 4000 crore in 2023.
But if you’re new to the term fractional ownership, you might be wondering: What exactly is it?
Fractional Ownership In Commercial Real Estate
The fractional ownership model secures funds from investors to acquire stakes in high-value commercial real estate, primarily through web-based Fractional Ownership Platforms [FOPs.] While primarily commercial, residential complexes and luxury vacation homes are increasingly adopting the co-ownership model. The minimum entry ticket of Rs 10 lakh set by Assetmonk ensures widespread investor participation in this evolving market.
This alternative investment model involves pooling resources from multiple investors who acquire high end real estate assets. These high end commercial properties have a lot of value, which would otherwise be difficult for a single investor to buy.
In simple terms, fractional ownership makes it easier for investors to invest in a commercial property by pooling their money together; instead of a single individual putting in a large amount of money to get sole ownership of the property.
Fractional Ownership Regulations: What Does SEBI Say?
The growth potential of fractional ownership has been acknowledged by the Securities & Exchange Board of India. The regulatory authority recently amended regulations and provided a proposed framework for fractional ownership: this action paves a new path for small and medium-sized Real Estate Investment Trusts (REITs) as now fractional ownership will be brought under the ambit of SEBI (REIT) Regulations.
According to the proposed regulations, investments in the fractional ownership model can have a minimum asset value of Rs 50 crore, as opposed to the current minimum asset value of Rs 500 crore for existing REITS. Under SEBI’s REITS rules, such fractional ownership assets are proposed to be included in Micro, Small, and Medium REITS.
What Does it Mean for Investors?
As a result, the new SEBI proposed framework has actually expanded the SEBI (REIT) Regulations to include FOPs: this will not only develop the market for joint ownership but will also protect new and existing investors.
Now that the regulatory authority has given its green light: Investors can rest assured that there is growing confidence in the market legitimacy of fractional ownership.
Going into 2024, fractional ownership models and platforms have been given enhanced credibility and protection; which only spells out good things for the future of joint ownership of commercial real estate.
By providing this regulatory green light– an assurance to investor protection; fostering confidence in market legitimacy is ensured- it lends enhanced credibility to fractional ownership platforms.
2024: Market Expansion of Fractional Ownership
SEBI’s new proposed framework is expected to elevate the fractional ownership market from USD 5.4 billion to USD 8.9 billion come 2025. A more inclusive market has been created by lowering the minimum asset value to Rs 50 crore.
And Assetmonk is leading the charge with a minimum entry ticket of Rs 25 lakh, making the commercial real estate market more accessible for a wide variety of investors.
Commercial Real Estate Leading The Way
Most fractional ownership models focus on high value, trophy commercial properties in prime locations in the market. In its latest report, CBRE predicts that the country’s commercial real estate market will rise from 37% in 2022-23 to more than 40% in 2023-24.
The commercial real estate market in India is thriving, especially in major cities like Mumbai, Delhi, and Bengaluru. IT, e-commerce, and startup industries are driving up demand for office spaces, retail establishments, and shared workspaces.
And the India Co-working Office Spaces market has already reached an impressive USD 1.78 billion this year, with a projected growth rate of more than 7% in the coming years; as per Mordor Intelligence.
The fractional ownership model is thriving, and the only way is up. Investors want exposure to the real estate market, and professionally acquired and managed commercial real estate is an exciting, promising option.
The Rise of Luxury Assets & Second Homes
The second homes market has also been given a big boost after post-pandemic market recovery. Hybrid workplaces and remote work have created a space in the corporate world, and many people have begin to look for new residences away from crowded cities to more peaceful and scenic suburban locations.
A luxurious estate and lifestyle is a priority for many in the current realty sector, and more and more investors are looking at luxurious second homes in tier-2 and tier-3 cities as a way of secure residential real estate investments.
As per CBRE’s Real Estate Outlook, residential sector sales have been at a decade high in 2023, making 2024 the perfect time to delve into it if you haven’t already.
Assetmonk: Guiding Investors in 2024
In this ongoing real estate revolution, Assetmonk has led the way as a pioneer in alternative real estate investment. Having led hundreds of investors to inclusive, flexible and diverse commercial real estate investments; while boasting an expected IRR of 14-24%; Assetmonk has a wide range of quality curated trophy commercial properties for you to choose from.
We also provide flexible liquidity options and tax-efficient structures, which are perfect for investors looking to diversify their portfolios and seeking to find the complete potential of fractional ownership.
As we venture into 2024, one thing is clear as day: fractional ownership has made a pivotal entry in India’s real commercial real estate market, and it is here to stay. The regulatory approval has positioned fractional ownership models for pole success; and new investors are being attracted everyday by the lucrative investment opportunities being provided by this new asset class.
In the midst of these promising circumstances: 2024 is the perfect time for seasoned as well as new investors to mark their foray into fractional ownership and probe its capacity for financial expansion.
Q: What is fractional ownership?
A: Multiple investors pool their resources to co-own a valuable property under the concept of fractional ownership. Instead of purchasing the entire property, each investor purchases a fraction or share of it.
Q: What is the scale of fractional ownership in India?
A: In India, the fractional ownership market grew from Rs 1500 crore in 2019 to around Rs 4000 crore in 2023, indicating a significant increase in interest and investment.