With soaring prices of real estate in India, the earlier popular concept of owning “real” estate in the Indian landscape seems like a far-fetched dream for the middle class, let alone talking about investing at large. But in recent years, technology-fueled startups have democratized real estate and investing under the aegis of an ownership cum investment model known as “Fractional Ownership”.

In layman’s terms, Fractional Ownership is a concept wherein a percentage of an asset is owned as a fraction, on payment of a proportionate sum of money, which in turn provides the investor (fractional owner) benefits such as usage rights, income sharing, priority access, and capital gains from the upside potential of high-value assets.

Fractional Ownership is not just limited to real estate investing, it works wonders for a plethora of high-value asset classes that have traditionally been limited to high-net-worth individuals or institutional investors. This can be attributed to high ticket sizes, geographical constraints, and information asymmetry, among other reasons. Today, online platforms have come up around the world allowing average investors to venture into high-value assets ranging from art pieces, unique collectables, antiques, commercial real estate, equipment and machinery to vineyards.

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When we apply this concept to real estate, fractional ownership helps bring like-minded investors together where they pool money to buy high-value residential or commercial properties. Platforms providing fractional ownership opportunities curate a list of high-value properties with in-depth research and analysis. All necessary information about the property is accessible to the prospective investors. Fractional ownership platforms provide an opportunity for average investors to come together and pool their resources to collectively own a high-value property. Thus, enabling real estate investing for as little as a few thousand rupees.

As discussed earlier, fractional ownership gives consumers the liberty to venture into different asset classes. Consequently, it allows one to diversify the investment portfolio. By owning a fraction of multiple high-value assets investors can spread their risk and potentially reduce their exposure to market fluctuations which might vary geographically, and this also allows the investor to enjoy greater liquidity compared to traditional ownership structures. In fractional ownership, several unrelated parties get to share in the risk and ownership of a high-value tangible asset. Thus, maximizing the gains from diversification and minimizing the loss by sharing the risks with other fractional owners.

With every passing day, each of us is getting busier and, in this hectic lifestyle, we rarely get time for managing our personal lives, let alone handle some property we are invested into. For this, fractional ownership companies typically have professional management teams who are responsible for the maintenance and upkeep of the assets. This reduces the burden on individual investors and provides them with peace of mind knowing that their investment is well taken care of. Adding to it, some of these companies offer the potential for passive income to investors through rental or leasing agreements (in proportion to the fraction owned).

Overall, fractional ownership companies provide investors with a unique investment opportunity that offers benefits such as access to high-value assets, diversification, liquidity, professional management, and fixed passive income. In light of all this, fractional ownership is becoming increasingly popular with investors, especially among millennials who have recently experienced slip-ups in conventional investments. The fractional ownership market in India is seeing a promising rise as the commercial real estate market is estimated to grow more in the coming years.

(By Shiv Parekh, founder of hBits, a fractional real estate platform.)

Disclaimer: Views are personal and readers are advised to consult their financial planner before making any investment.

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