Fractional Ownership an emerging investment avenue in India: JLL

 Key Highlights:

•                     ~INR 350 crores worth of deals transacted or are in the final stage of conclusion in the last one year.

•                     Office as an asset class within real estate has attracted equity investments of USD ~19 billion in the last 5 years; REITs contributed USD ~1.75 billion through 3 large issues of Embassy, Mindspace and Brookfield.

•                     Investors are keenly evaluating opportunities on office and warehousing side.

•                     Yields are in the range of ~7.75% to 8.5% for office and is in the range of ~8.5% to 9.5% for warehousing.

•                     Investors looking at Mumbai, Pune, Bengaluru, and Hyderabad markets favourably.

•                     HNI’s and Family Offices see merit in investing their money with a professional setup wherein they get access to some of the best properties with good tenant profile.

Fractional Ownership an emerging investment avenue
in India: JLL

 ~INR 350 crores worth of deals transacted or are in the final stage of conclusion in the last one year.

• Office as an asset class within real estate has attracted equity investments of USD ~19 billion in the last 5 years; REITs contributed USD ~1.75 billion through 3 large issues of Embassy, Mindspace and Brookfield.
• Investors are keenly evaluating opportunities on office and warehousing side.
• Yields are in the range of ~7.75% to 8.5% for office and is in the range of ~8.5% to 9.5% for warehousing.
• Investors looking at Mumbai, Pune, Bengaluru, and Hyderabad markets favourably.

Fractional ownership has emerged as a new way of investment in commercial real estate and has caused extensive rebranding in realty sector. While the concept of fractional ownership in the real estate has been prevalent in the US and Europe market for a long time, it is now gaining momentum in India. The commercial real estate asset class has been the playground for largely institutional investors since years and is gaining momentum as an investment avenue for the aspiring middle class and retail investors.

In recent months, the acceptance of fractional ownership has jumped multifold and the same is visible with the transaction values. In a short span of 5 years, fractional ownership companies have done transactions worth INR ~750 crores across the country. Backed by innovation and high-end technology, demand and high resilience of the sector has pent-up and the confidence of investors is on rise especially during the pandemic.

 “Fractional ownership companies have created a new set of opportunities for retail investors. Despite the covid-19 impact, out of the total fractional ownership market, approx. INR 350 crores worth of deals have been transacted or in the final stage of conclusion in the last one year alone. These transactions are mix of office and warehousing deals,” said Vishal Ahuja, India Head, Private Health Group, JLL India.

HNI’s and Family Offices see merit in investing their money with a professional setup wherein they get access to some of the best properties with good tenant profile. Like the West, this concept is gaining acceptance here with the investors willingness to embrace the shared economy”, he further added.

Various model structures have suggested that the concept of fractional ownership in India is currently seen as the evolving asset class. This model has been adopted by the commercial real estate industry in various forms and has opened investment opportunities for retail investors who can benefit from diversified portfolio of asset classes. It is also gaining popularity with young Indians who are looking at availing benefits of this ownership; Grade 'A' premium properties, portfolio diversification, capital appreciation, higher liquidity and superiors’ ROIs.

“Transparency along with increased use of technology is another reason for high level of acceptance. Transaction details like deal specific documentation is shared with investors. They also provide a dashboard access to investors for tracking their investments. All these factors have a positive bearing on the entire process, Ahuja adds.

Fractional ownership is a new alternate means of investment in Commercial Real estate apart from REITS and is gaining prominence due to long term investment into a stable asset class with high returns, convenient way of investment with no hassles of managing the asset and ease of exiting the investment. Potential benefits with fractionally owned property also tend to be longer than with timeshare, and the size and quality of fractional ownership properties are getting better, with superior access to facilities and services.

Apart from the office space as a primary focus segment, warehouse & industrial parks is another such asset class which is likely to attract fractional ownership companies, with the increasing demand of warehouses to cater to the needs of the expanding e-commerce industry and challenges in terms of last-mile delivery and incremental cost of maintaining forward distribution points.

Majority of young investors aged between 30-50 years in Tier I and Tier II cities are looking at opportunities to invest in Grade A assets with diversified use that offer attractive yield in a short period of time with low risk, high transparency and are economical and convenient.