In the last few years a new trend can be seen emerging rapidly in the Indian realty sector which is known as partial ownership or 'Fractional Ownership'. What is fractional ownership, how can it be taken and what are its advantages and disadvantages? Let us try to understand all these things in detail.
What is fractional ownership?
In such purchase of property, the investor does not have full ownership of a particular property but has a partial stake in that property. Almost like you are able to buy shares of a company in the stock market. As far as the realty sector is concerned, through such investment options, investment options can be found even in expensive i.e. high value properties. This system of fractional ownership is very attractive for small investors who want to participate in the property market despite having less capital.
Small investors have access to great assets
Fractional ownership gives investors access to a larger property market, particularly commercial properties that are difficult to purchase individually. If we talk about metros or big cities, the prices of properties there are often high, hence it is not easy for an ordinary or small investor to buy these properties. Through fractional ownership, any investor can invest in expensive properties by taking stake. This gives them a share of the potential profits from the property and that too without investing a huge amount. This investment model is becoming financially accessible to many people and such investments are increasing in metros.
how much risk
Fractional ownership also gives investors the opportunity to diversify their portfolio by having partial ownership of the property. In general, investing in real estate requires investing large sums of money in a single property, which increases the risk. But under this model, investors can make small investments in different properties at different locations. This also spreads their risks and if the price of one asset falls, they can get profits from other assets. This investment model is a great way to control risk.
No worries about property management
A major feature of this model is that investors do not have to worry about the maintenance of the property. Investors in fractional ownership avail the services of professional property management companies, which handle the day-to-day management of the property. This is a big relief for investors who want to be free from property maintenance. Many times it happens that if any problem arises regarding the property, the property management companies handle it with ease.
Interest of NRI investors
Fractional Ownership: Now NRI investors are also showing great interest in fractionally owned companies. This is because NRIs get the opportunity to invest in the property sector in India without any hassle. Since property management companies take charge of the maintenance of the property, NRIs are freed from having to come to India to take care of the property.
Opportunities and Challenges
Although fractional ownership investing has many advantages, it also comes with some challenges. The biggest challenge is liquidity. Selling part of the property is not as easy as it is in the stock market. Additionally, there may be disagreements between co-owners regarding the use or management of the property. Investors should seek legal advice before entering into this model and clearly understand all the terms and conditions to avoid potential disputes.
There is no doubt that fractional ownership is a new and interesting investment model in Indian real estate that is likely to become more popular in the coming years. This model also provides investors an easy and effective way to enter the property market which coincides with India's growing real estate market. In such a situation, if you also move towards such an option, it can definitely prove beneficial for you.
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