MSM Reits: How you can earn from tiny realty holdings
₹4,000 crore in assets under management (AUM). Strata and PropShare emerge as front-runners, each managing an impressive ₹1,200 crore. Following closely, AssetMonk and WiseX handle AUMs of ₹300 crore each.
hBits maintains a substantial AUM of ₹260 crore, while Alyf and Yours have AUMs of ₹85 crore and ₹65 crore, respectively. The transaction flow in a fractional ownership platform involves various stages. It starts with the FOP showcasing property details like entry yields that includes gross rental income on pre-leased properties, target IRR (internal rate of return) that encompasses rental income and property appreciation, property photos, tenant information, and growth estimates on their website.
Investors assess these properties and based on their risk preferences put in funds. The FOP sets up a Special Purpose Vehicle (SPV), which utilizes the funds to purchase the property. The FOP usually charges an upfront fee at the beginning of this process, typically as a percentage of the total investment.
For instance, it might be 3% of the total pooled investment. Additionally, the FOP gets property management fees, around 20% of the revenue generated by the property. Upon the property’s sale, the FOP charges performance fees, usually around 20% of the gains realized, sometimes with a predetermined hurdle rate (for instance, 8%).
Investors receive rental incomes after deduction of fees and any tax deducted at source. The same flow applies to capital gains. Real estate investment deals are diversified across various platforms and entities.
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