Sebi wants to nurture Indian real estate’s ₹4,000 crore baby. But why?
₹25 lakh each. Under the fractional ownership model today, ₹25 lakh is the industry standard for minimum investment required. This cutoff keeps small investors at bay.
Poddar says his experience, thus far, is good. The assets are of good quality and were already leased out by the time he invested. He receives timely rents.
But he does have concerns. Exit through a secondary sale won’t be easy, he feels. Then, there are other questions.
Many platforms promise high rental yields (yearly rental income as a percentage of a property’s value) of up to 9-9.5%. Is that even feasible? Office real estate investment trusts (Reits), in contrast, typically end up with 5-6% annual rental yield, industry watchers said. Residential real estate’s rental yields are in the range of 2-3%.
The fractional platforms aren’t regulated in India yet. So, will they deliver what they promise? “The secondary market is not that mature and platforms are less receptive in helping with an exit," Poddar said. His advice: read the fine print carefully.
“Grade A commercial real estate is now within your reach. Have multinational corporations as your tenants," a promotional video from hBits tells us. “Join the league of private equity giants like Blackstone and Brookfield and own a fraction of real estate from ₹25 lakh onwards with the single push of a button," the video further exhorts.
Joining that big league is surely aspirational for many retail investors. Capitalizing on that aspiration, about a dozen fractional ownership companies are currently operating in India. Under this sort of ownership, investors get equity and compulsory convertible debentures (CCDs) to the proportion of their investment made in the SPV for a particular asset.
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