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Fractional Commercial Real Estate Ownership Gains Traction in Volatile Markets

Fractional ownership, where a group of investors share ownership of a commercial property, is starting to take hold in India. Shared passive ownership of high-value commercial real estate isn’t anything new in the European, U.S., Singapore, and Hong Kong markets. Now, the concept is beginning to burgeon in India as working professionals in the country frequently face a scarcity of feasible investment opportunities, particularly in real estate, according to The Times of India.

Fractional ownership alleviates a single investor’s financial load while allowing them to create a stream of cash flows and equity as a property’s fractional owners. For years, the Indian public has seen residential real estate as the most surefire investment and a solid inflation hedge (just as many of us do in the U.S.), but young investors on monthly salaries find it difficult to save sums large enough to purchase a single residential property. Furthermore, commercial mortgage rates in India are between 9 and 11 percent, making property ownership difficult for all but the highest earners.

After COVID-19 decimated market sectors and eroded investor trust in traditional assets, Indian investors are finding fractional ownership as a low-risk, high-return model in a volatile market. Investors have been persuaded to become fractional owners of commercial properties because of the portfolio diversity, ease of exit, and capital appreciation. This could turn out to be an increasingly popular investment if the Indian commercial real estate market hits its target 13 to 16 percent growth over the next five years.

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