Fractional Investment in Commercial Real Estate – What’s the real deal?

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Fractional investment in commercial real estate is gaining traction in India. One of the earlier ventures in this space, PropShare, recently got commitment from thousands of investors. The total interest was valued above Rs 1,000 crores with an upfront cash commitment of close to Rs. 80 crores.

Another company following in the footsteps is StrataProp. Both of them offer an opportunity to High Networth Investors to invest in commercial real estate in fractions.

Simply put, if a commercial real estate property is worth Rs. 50 crores, they will pool in money from many investors and buy the property jointly. These properties are rented by known and financially strong companies (also called Bluechip tenants). Rentals flow in a predictable manner and over time the property appreciates too.

Rental is paid out to the investors in the proportion of their holding on a regular basis and at the time of sale the appreciation is shared in the same ratio too.

The fractional investment company manages the whole show and takes a cut of the rental as well as the appreciation.

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The expected minimum investment is Rs. 25 lakhs to Rs. 50 lakhs per investor. Quite clear, that this is meant for someone with deep pockets.

Your share of holding is available to you in demat units and it also reflects in your NSDL/CDSL statements.

So, here is an investment offer I came across recently.

This looks like an interesting proposition worth investigating more. So, I go into the details.

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Vipin Khandelwal
Vipin is a SEBI Registered Investment Adviser. He works with investors to make better decisions and create behaviour alpha.
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