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Chartered Accountants and Lawyers show the maximum relative interest in investments towards fractional ownership of Commercial Real Estate, reveals the ‘MYRE NEO-Realty Survey’ by MYRE Capital, a neo-realty tech-enabled fractional ownership platform.
Other segments of the investor and user base include Doctors, IT professionals, entrepreneurs, and other business owners. These investors prefer fixed income options that are collateralized with a hard asset and have started appreciating the favorable risk-return profile of fractional CRE and the end-to-end management provided by fractional ownership platforms.
MYRE Capital conducted a nationwide MYRE NEO-Realty Survey 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 the remaining 17% interested investors belonged to the age group of above 60 years. 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 realize additional gains at the time of exit due to capital appreciation.
Commercial Real Estate has always been the affair of either financial institutions or affluent families, primarily due to high entry prices. 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 to India’s CRE market.
MYRE Capital’s Founder and CEO, Aryaman Vir said, “Fractional investment has long existed in India but in an unorganized 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. The most common challenges like large ticket size, operational tasks, lengthy and complicated documentation, lack of expertise, and trust are being solved by our platform to make this a more inclusive and accessible asset class. 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.”
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.
While investing in traditional CRE, the basic challenges that young investors face are high ticket prices, lack of expertise, and exposure; older investors face issues about lack of trust, the burden of day-to-day operational management, and fair value determination.
However, investing via fractional ownership gives these investors the chance to invest in institutional-grade properties with twice the yield of FD returns, a transparent Investor Dashboard facility that builds their trust and the capital is preserved with monthly returns. Further such platforms provide end-to-end management for the entire life-cycle of the investment.
As the demographics in India are transitioning to 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.
As mentioned in the survey, in the shorter term, investors have highlighted rental income, reallocation of profits realized in equity markets, diversification of capital, and effective monthly cash flow alternative as the driving factor with regards to their interest in fractional CRE. On the other hand, a list of long-term goals for the same investors includes CRE portfolio creation, wealth creation, capital appreciation, and capital preservation.
The fractional space has gained significant traction in India, with MYRE Capital receiving NRI traction from over 14+ countries along with domestic users from 16+ cities in India.
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 the US, UAE, UK, Denmark, Nigeria, Australia, etc.
Fractional ownership platforms are making it viable for retail investors to participate in institutional-grade rent-yielding properties from a minimum investment size of 25Lacs. MYRE Capital was launched on January 2021 and has aggregated three Grade-A real estate properties in its assets under management totaling INR ~70cr+.
The platform aims to conduct the MYRE NEO-Realty Survey annually to understand preferences and emerging challenges faced by their users to address them and develop technology solutions for a better customer experience.