Fractional ownership, simply put, is a method of ownership where investors collectively put small sums of money to individually own a fraction of high-value property. The unified purpose is to gain superior returns over time.
While such kind of holding structures in Real Estate are quite old, the innovation is about how new-age platforms are using technology, to increase the depth of its investor base and making the whole process of acquisition and management hassle-free, and leveraging professional expertise to differentiate.
An investor’s journey begins on an online portal, which lists pre-screened investment properties, accompanied by all requisite information – property documents, due diligence reports, lease contracts, etc accompanied by in-depth market analysis and third-party valuation reports. There is also an offline support made available for any specific queries. Once interested, investors complete their KYC process and make an investment against issue of shares of a company that will hold the asset, making them the real but part owners of the property. Post investment professional managers take care of any matter related to property. Investors receive respective share of monthly rents and proceeds from the sale of the asset. They are also issued periodic reports on their investment.
Exit is either in a way of selling their shares to other investors on the platform or to any compliant third party. Anyways they are given an automatic exit after the investment horizon say 5-6 years are over. One should have a longer investment horizon when it comes to Fractional Ownership.
Fractional platforms charge an annual asset management fee and a performance linked fee, once a minimum hurdle on investment is achieved.
For example, Frxnl which is a technology-enabled investment platform has started offering fractional investment opportunities in pre-leased Commercial Real Estate. Frxnl provides access to high-value high-return opportunities by letting you invest small and yet own a part of prized real estate properties. It not only allows users to diversify their wealth portfolio but also grow it seamlessly without having to physically manage it.
The concept of fractional ownership has yet to catch-up in India. However, digital platforms could play a key role in the future. It is also more for longer term players, who have large sums available unlike shares and stocks, where you can start with small sums.
However, if real estate investment is something that you like, fractional investment maybe a good way to start.
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