Now invest in pre-leased commercial properties
When a commercial property is purchased from the pooling of funds from multiple investors, each of the investors gets fractional ownership of the property to benefit from the share of rental income generated by the property and the appreciation in the property’s price.
Fractional ownership opens the access for small retail investors to a wide range of high-yielding Grade-A commercial properties which require heavy capital investment otherwise and generate much better returns for the investors than investing in traditional residential and commercial properties.
Fractional ownership also provides a stable and secure return for investors even when the economy is subjected to exogenic shocks resulting in unprectictable future unlike traditional real estate which are impacted by economic conditions.
The property will not be registered in any investor’s name. A special purpose vehicle (SPV) will be created comprising all the investors and the property will be registered only in the name of the SPV. The investors will have a shareholding in the SPV based on the proportion of their investment and will own equity shares and debentures in the SPV
We have multiple opportunities for investment in Grade-A commercial properties ranging from Commercial Office spaces in the heart of metro cities to commercial warehouses in the biggest industrial hubs. Due diligence is carried out by the asset management company both in terms of legal as well as technical before listing to ensure maximum returns for the investors
The return on investment is in the form of
- stable rental income of 8% – 10% from the pre-leased property
- Capital appreciation on the property of more than 5% per annum provided the investor chooses to stay invested for a minimum period of 4-5 years.
Just like any asset class, the returns in this investment are also subject to the risks associated with the asset class.
The risks associated with this asset class comprise but are not limited to tenancy risk, liquidity risk, and market risk although the asset management company will do due diligence to minimize any kind of risk associated with the investment. The rental income is subject to the availability of tenancy in the property and the asset management company minimizes the risk by investing in only pre-leased property to Grade-A tenants with long-term lease and lock-in.
You will be charged management fees (~1% of investment value) every year by the asset management company for the asset upkeep, tenancy management, and other asset management activities undertaken by the organization. Please note that you will be charged management only for the duration you receive the monthly rent.
You will also be charged a performance fee (~20% of the value exceeding hurdle rate) upon sale of property provided that the property crosses a hurdle rate (~8% to 10%) of capital appreciation
There is a small lock-in period of ~6 months depending upon the opportunity.
The investors are advised to invest for a minimum duration of 4-5 years to allow the property to appreciate and avail better returns. However, in cases where an investor requires liquidity, an exit on the investment can be facilitated by the asset management company.
The investors can exit the investment by:-
- collective exit by asking the asset management company to find a prospective buyer for the property through a vote of more than 75% in favor of the sale of the property. Generally, the asset management company seeks such a vote in 4-5 years.
- individual exit by selling your fraction to anyone known to you and the asset management company will facilitate the share transfer. Individuals can also approach the asset management company for the sale of their holding the asset management company will facilitate to find the buyer through their portal.
NRI Investors can invest in any such opportunity through an NRO account or a domestic savings bank account in India. All other conditions and benefits remain the same for NRIs.
NRI customers will have to pay taxes as per the tax slab defined by Indian government provided their income in India exceeds basic exemption limit.