Imagine owning a bustling downtown apartment, an A-grade corporate office, or a serene vacation property by the beach. Real estate investment can make these dreams a reality along with adding diversity and stability to your portfolio. Real estate can be a valuable addition to your investment portfolio, offering unique benefits and challenges. By exploring different strategies and ways of investing, you can find the right fit for your financial goals.
In this blog, we will look into the pros and cons of investing in real estate, how much exposure you should maintain in your portfolio, and the options available for investment.
The Pros of Real Estate Investing: Investing in real estate comes with various benefits, like it offers a steady income stream in the form of rent, potential for capital appreciation, hedge against stock market uncertainties and inflation, tax benefits on loan interest payments, and emotional satisfaction of owning a property.
The Cons of Real Estate Investing: Owning and managing properties has been a daunting task for many. Imagine high entry costs, liquidity issues, and hassles of managing it. These issues have been keeping investors away from this investment option.
Reducing the Cons of Real Estate Investing
New ways have emerged to invest in real estate, especially to counter the cons mentioned above. Besides the traditional way of buying a full unit of residential, commercial, or vacation property, investors can now buy these assets with like-minded co-owners. This is called fractional ownership of real estate, available through fractional ownership platforms.
Benefits of Fractional Real Estate
- Lower Capital Requirement: Most fractional ownership properties demand a ticket size of Rs. 20 – 25 lakhs only. Compare it with the traditional way of buying a property, where the ticket size should be at least a crore in premium assets.
- Regulatory Landscape: Recently, SEBI introduced a regulatory framework for SM REIT (Small & Medium Real Estate Investment Trust). Under this regulation, fractional ownership platforms can list their properties for secondary market transactions (buying and selling). This enhances liquidity for investors and reduces the ticket size further to Rs. 10 lakhs. The regulation also forces these platforms to invest the investor’s money in a minimum of 95% completed and revenue-generating properties.
- Portfolio Diversification: With fractional real estate, it’s more convenient to spread your investment across multiple properties to reduce overall risk.
- Access to Premium Properties: Fractional ownership platforms and SEBI regulations offer you an opportunity to invest in premium, high-return properties typically reserved for large investors.
- High Returns: Under fractional ownership, you can know the rental yield and estimated capital growth well in advance before finalizing your decision to invest in a particular property. This allows you to benefit from investing in valuable properties with higher regular income and overall returns.
- Regular Passive Income: Earn rental income while also benefiting from potential appreciation.
Deciding the portfolio allocation: Based on our experience and the current property price trends in India, investors may consider allocating up to 25% of their portfolio to real estate. This allocation can provide stability and potential capital growth, given the steady rise in property values. However, it is crucial for investors to carefully analyse their future financial needs and liquidity requirements before deciding on their exposure to real estate. Real estate investments are typically less liquid compared to other assets, so ensuring sufficient liquidity for emergencies and other financial goals is essential.
Conclusion
We find that fractional ownership offers a streamlined and hassle-free way to invest in prime properties without the heavy financial burden. To add convenience, we at Millionsworth Financial Services have brought properties from multiple reputable fractional ownership platforms under one roof with the sole purpose of offering our investors various options across multiple geographies to suit their preferences.
Start your real estate investment journey today and build a diverse, robust portfolio with confidence. For more information, contact us at Millionsworth Financial Services. We are committed to helping you understand these investment options in greater detail and in line with your unique circumstances to help you achieve your financial goals.
