What is fractional ownership?

What is fractional ownership?

Everyone dreams of owning a luxurious property or a million-dollar asset. In this modern era, almost all of us hustle and work hard to achieve our goals. However, it takes a lot of efforts and time for an individual to save hefty amount of money to own something big. And what if the starting price of such an asset is out of your reach? What if, you can never afford to own the property of your dreams? To bring a permanent solution to this problem, the finance industry came up with an idea of fractional ownership.

In this blog, we will briefly discuss about Fractional Ownership and why you should opt for this concept?

What is it?

When it comes to the Commercial Real Estate, the mode of ownership has evolved dramatically over the past few years. It is needless to say that even after you somehow manage to purchase a highly-expensive property, your troubles won’t end there as you will be burdened with multiple financial expenses such as expenditure on the maintenance of your property, taxes, etc.

With the arrival of fractional ownership, the financial burden on a single investor has been reduced.

Fractional ownership refers to a set-up wherein groups of investors pool in their funds to purchase a high-value asset or property and share passive ownership of that unit. This method simply divides the entire expense of a luxurious building into multiple fractions, allowing today’s generation to participate in new opportunities and get to own at least some part of their dream property.

Now, let’s understand this with an example.

For an instance, a high-priced priced commercial property in Delhi costs Rs 50 crore to a single owner/investor. But a working professional with an investment amount of Rs 25 Lakh can fulfil his/her dream to purchase that property through fractional ownership and can even earn the similar benefits such as high yield in the range of 8-12 per cent.

Earlier, investing in the Commercial Real Estate (CRE) was considered to be the choice of wealthy and experienced investors. However, the times have changed now. With the emergence of new-age prop-tech platforms, the millennials can purchase a high-cost commercial building without much fuss, enjoy the yield generating from that property, sell their fraction whenever they want, and also take the benefits of capital gains at the time of exit.

Why you should choose fractional ownership?

While the earnings from the stock market are highly dependable on the market sentiments and vary with its fluctuations, experts believe that it is not the case with fractional ownership as it offers stable returns for longer period of time.

Besides this, everybody knows that owning a property generally involves a lot of paperwork which can be quite difficult and hectic, especially when you are investing in real estate for the first time. However, when it comes to fractional ownership, the process of investing is much easier as all the required documents and information are already available online and can be accessed from anywhere.

In addition to this, fractional ownership is considered to be a pocket-friendly mode of investment. It offers investors all the advantages of owning a commercial property without even having to invest huge upfront capital in it.

Moreover, this approach gives you a benefit of steady income. As we have mentioned above, the method of fractional ownership is typically used to invest in the Grade A properties with long lease contracts. This means that you will have a regular flow of income irrespective of the changing dynamics of market.