Fractional ownership, Real Estate Investment Trusts, and real estate mutual funds all offer investors an avenue to invest in the sector in India with little money (Pic: DALL-E)
Real estate investment: With the emergence of commission-free stockbroker services, user-friendly mobile applications, affordable smartphones, and an extensive social media knowledge base, contemporary retail investors are well-equipped to explore diverse asset classes such as the stock market, fixed deposits, mutual funds, cryptocurrency, and more. Commencing in 2014, Indian retail investors gained entry to a historically exclusive asset class, traditionally reserved for High-Net-Worth individuals or institutional investors—Real Estate.
Fast-forwarding to 2023, retail investors, particularly the younger demographic, now have various avenues to invest in real estate without depleting their financial resources, enabling them to earn passive income at an early stage.
Buy/sell, rent/lease residential &
commercials real estate properties.
Here’s how individuals can invest in real estate without relying on significant bank loans or substantial cash reserves.
Option 1: Fractional Real Estate Ownership Platforms
Fractional Ownership represents the latest trend in India’s real estate market. Similar to sharing a giant pizza with friends, fractional ownership involves purchasing a small piece or “fraction” of an expensive property, offering rental yields and property appreciation. Fractional ownership platforms facilitate investments in commercial and residential properties in high-growth Indian areas such as Navi Mumbai, Pune, Goa, Hyderabad, etc., allowing for multiple real estate investments.
These platforms handle property management, operational logistics, due diligence, and tenant acquisition, enabling investors to enjoy earnings from the comfort of their homes.
Option 2: Real Estate Investment Trusts (REITs)
The Real Estate Investment Trusts Regulations, enacted in India in September 2014 after substantial modifications, opened the door for retail investors to participate. A Real Estate Investment Trust (REIT) is an entity that directly invests in income-generating real estate, traded like a stock on the public market. Three primary types of REITs include Equity REITs (income-generating properties), Mortgage REITs (providing loans to real estate companies), and Hybrid REITs (a combination of the other two).
While REITs offer straightforward buying and selling on the public market, their performance may be influenced by market volatility.
Option 3: Real Estate Mutual Funds
Real Estate mutual funds invest in securities from real estate sectors. The funds act as capital to support real estate companies in constructing properties. These mutual funds invest in various REITs or other real estate sector-related stocks, with a specific focus on equity-related REITs.
All three options provide retail investors access to the real estate sector, and the choice depends on individual investment objectives. REITs and Real Estate mutual funds may be suitable for those seeking faster liquidity, whereas a fractional real estate ownership platform is more advantageous for long-term investors aiming for property appreciation. Nevertheless, all three options contribute to the diversification of investment portfolios.
This article has been written by Mananki Parulekar, Co-Founder, Claravest.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of Times Network)