Bengaluru, Pune, Mumbai have emerged as top cities for future fractional commercial real estate investments, according to a survey by MYRE Capital, a neo-realty tech-enabled fractional ownership platform.
Chartered Accountants and lawyers show the maximum relative interest in investments towards fractional ownership of Commercial Real Estate while other segments of the investor and user base includes Doctors, IT professionals, Entrepreneurs, and other business owners.
These investors prefer fixed income options that are collateralised with a hard asset and have started appreciating the favourable risk-return profile of fractional CRE and the end-to-end management provided by fractional ownership platforms.
“Fractional investment has long existed in India but in an unorganised manner. Even now, investors limit themselves to residential real estate as their only choice of investment and we want them to be aware of CRE as an effective avenue,” said MYRE Capital’s Founder and CEO, Aryaman Vir.
The survey was conducted by collecting responses from over 1500 high-ticket registered users and investors.
According to the survey, 68% of interested investors in Commercial Real Estate (CRE) are within the age group of 36-60 years. 15% of the interested investors are between the age group of 25-35 years while remaining 17% interested investors belonged to the age group of above 60 years.
“The most common challenges like large ticket size, operational tasks, lengthy and complicated documentation, lack of expertise and trust is being solved by our platform to make this a more inclusive and accessible asset class,” Vir said.
Though investors belonging to 60 years and above, have traditionally been averse to alternative investments, the trend is changing. CRE is enabling these investors to earn a collateral-backed steady monthly inflow with the probability of additional benefit of annual capital appreciation realized over time. This enables investors to realise additional gains at the time of exit due to capital appreciation.
The survey highlights some key needs and changes required by investors in the traditional form of investing in CRE like easier access to opportunities (33%), increased transparency (20%), data symmetry (21%), and streamlining of processes (24%). Fractional ownership platforms are addressing these issues to bring more trust and transparency in India’s CRE market.
“We believe that, with the regulations shaping out, investors will become more comfortable to place their trust in CREs and will be able to earn great returns from promising real estate opportunities in the country,” he added.
The report also indicates that the investment preferences of investors vary with age. Young investors have a high risk-high return appetite and are ready to geographically diversify their property investments.
Older investors prefer a low risk investment option with collateral-backed stable fixed income as many of them are retired and do not have a regular source of income. CRE is a unique asset class as it caters to the requirements of both segments. Individuals looking for a stable fixed income source can achieve relatively high yields via the monthly rental income.
Since fractional ownership opportunities are secured by an underlying hard asset, the risk profile fits well with the objectives of conservative investors. Such opportunities are also preferred by younger investors that are looking for double digit annualized returns – factoring in the annual capital appreciation, such investors can earn 17%-25% IRR without having to compromise on their risk exposure.
As the demographics in India are transitioning to a more equitable gender distribution, CRE has seen increased participation from female investors. The survey reveals that from the total set of individuals that were surveyed, 41% were female users and investors. This gender distribution is relatively more equitable than most investment avenues.
The survey shows that cities are gaining maximum traction among other key markets. Bangalore takes the lead with 27% of investors showing interest in fractional ownership, followed by 21% interested in Pune’s real estate. The survey also identifies that India is being seen as an emerging market for investments by the NRI community with almost a third of the respondents from countries like US, UAE, UK, Denmark, Nigeria, Australia among others.