Needless to say diversifying investments is essential for Indian investors seeking financial stability and growth. With India's status as one of the world's fastest-growing economies driven by private spending and capital accumulation, the real estate sector stands out as a top investment choice. In India's dynamic market, real estate is renowned for its stability and robust growth potential. Apart from investing in traditional residential properties, fractional ownership presents an excellent opportunity for long-term wealth building.
The real estate market has consistently delivered steady returns, supported by India's robust economic fundamentals, GDP growth is projected to be in the range of 6-6.8% in 2023-24. Investing in real estate balances portfolio risk by providing a tangible asset that appreciates over time, offering both income and capital gains. Unlike stocks or bonds, real estate is less susceptible to short-term market volatility and provides protection against inflation. Rental income from properties also offers steady cash flow, which can offset losses in other investments.
Growth Potential in Commercial Real Estate in India
Property values in India have consistently risen, driven by urbanization, economic growth, and infrastructure development. Office space gross absorption reached an all-time high of 13 million square feet (MSF) in Q1 2022, a 3x increase year-on-year. Investing in commercial real estate offers high capital appreciation potential. Commercial properties in Delhi and Gurugram yield rental yields of 8-12%, higher than residential properties. Areas like Mumbai's BKC and Bengaluru's Whitefield have seen substantial returns due to demand from multinational corporations and robust infrastructure. Cyber City in Gurugram has become a top business district, providing substantial returns to early investors.
Fractional Ownership (SM REITs)
Imagine owning a part of a prime commercial property or a luxurious residential complex, just like you own stocks in a company. Fractional ownership in real estate, also known as SM REITs, makes this possible. It's a game-changer because it allows multiple investors to share the ownership of high-value real estate assets while reaping the benefits of rental income and property value appreciation. This opens up the world of real estate investment to a wider audience by breaking down the traditional investment barriers.
In India, real estate holds a special place in the hearts of investors, with households allocating a significant 77% of their assets to it. And why not? It offers a balanced risk-return profile, with rental yields ranging from 8-12% and plenty of opportunities for capital appreciation. What's more, non-resident Indian (NRI) investments in real estate are on the rise, attracted by the potential for capital appreciation and stable rental income.
The beauty of fractional ownership in real estate is that it allows you to diversify your investment portfolio and benefit from a steady stream of rental income, as well as the potential for substantial capital appreciation. The cherry on top - it will be regulated as SM REITs by SEBI, making the entire process more structured and secure for investors across the world.
So, by including fractional ownership in real estate in your investment portfolio, one can experience a whole new level of accessibility to premium commercial real estate, lower investment barriers, increased liquidity, and the potential for significant returns.
The commercial real estate sector in India is projected to grow at a CAGR of 21.60% between 2023 and 2032, reaching a value of USD 241.82 billion by 2032. As you think about diversifying your investment portfolio, considering options like fractional ownership (going forward to be known as SM REITs) could offer valuable opportunities for better returns and risk management in India's growing real estate market.