What Role Can Fractional Ownership Play in Boosting Market For Luxury Resorts and Vacation Homes in India?

In India, there has been a rise in the demand for high-end holiday rentals. People who have been waiting for prices to drop so they may buy a spectacular home by the beach or in the mountains for a steal may now be ready to enter the market.

Investing in real estate via fractional ownership is both more affordable and potentially lucrative.

Class A commercial buildings and high-end homes are only two examples of the growing number of asset classes where fractional ownership is becoming the norm. This method paves the way for middle-class investors to spread their financial wings and develop many streams of income with very modest outlays of capital.

Several new businesses in India are capitalising on technological advancements to promote a notion that has already been widely adopted in Europe and the United States. The three most popular categories in the Western hemisphere are investment properties, second homes, and holiday homes.

After a global epidemic, people may be more interested in the idea of buying a "share" in a vacation home or luxury resort. Numerous recollections of COVID-19 have been left in the minds of urban householders.

Fractional ownership provides an affordable way to escape the confines of the city and the areas designated for virus containment on a regular basis. If use of the option is not available, the income might be shared among the owners.

The capacity to use and rent out a property is a defining feature of fractional ownership.

Exactly what does it mean to have "shared ownership?"

Under factional ownership, many investors buy into a single asset as a group. All the shareholders possess a little fraction (or percentage) of the whole. Individuals with more modest resources may take part since ownership can be spread among as many investors as desired.

Through fractional ownership, investors have a chance to own a portion of premium property in sought-after urban cores or tourist hotspots. Investors get a return on their money that is proportional to the amount they put in via rental income, capital appreciation, and, in the case of vacation homes, the amount of time the owners spend using the property for themselves.

The latter often involves an agreement to transfer the right to use a piece of property for a certain amount of time. The fractional owner, surprisingly, is not responsible for the routine upkeep of the property. In the hotel industry, fractional ownership has shown to be a lucrative investment.

Resorts in the Western Hemisphere's vacation-home markets often set the prices for their fractional ownership choices in accordance with the property's location, amenities, and demand.

Despite its unique characteristics, this business model provides a fundamentally safe and attractive investment opportunity, which is why many organised players have already begun to implement it. Residential fractional ownership is seeing the same surge in popularity that its commercial counterpart has had in recent years.

Over the last several years, the luxury real estate market has started to warm up to this idea thanks to the backing of both established companies and specialised start-ups.

The fractional ownership markets for high-end homes and vacation properties are booming, and BRIKitt is at the forefront of this industry as a leading PropTech company. There are a number of players in the market for fractional ownership, including Fracsn, Propertyshare, Strata, Myre Capital, Assetmonkey, Grip, and RealX.

These PropTech companies integrate elements of finance, technology, and property to create an environment in which ordinary people may make secure real estate investments.

These marketplaces often manage many vital facets of investment, from initial discovery to eventual liquidation. They also help investors with things like due diligence, looking into the best options, getting the title paperwork for the asset, and comparing the asset to others in the market.

Investors in resorts and vacation homes, for example, use the property for a predetermined period of time (anywhere from a few weeks to a year) and are interested in both the future financial returns (in the case of commercial or even residential properties) and the use (in the case of fractional ownership platforms) of the property.

The appeal of this paradigm cannot be stressed in a situation where a pandemic has undercut most of the pleasures of urban life and raised the desire to leave it, especially with the additional plus of being able to work from anywhere.

Investment in REIT vs. Fractional Ownership

In India, real estate investment trusts (REITs) may only invest in commercial properties at this time. Unlike REITs, in which investors hold a diverse portfolio of properties, factional ownership of commercial buildings involves several investors controlling a single asset.

Unlike with REITs, where several properties make picking and choosing difficult, investors in fractional ownership may pick and choose which properties they want to purchase.

Fractional ownership and real estate investment trusts (REITs) are both newer concepts in India, although REITs are a tried-and-true, risk-free investment option in most developed nations. In 2019, they were officially introduced in India, where they have been met with widespread enthusiasm and are already producing very high returns.

Care should be taken while selecting a property, or even a platform, for fractional ownership, just as it would be with any other real estate asset; seeking professional advice is strongly advised. The notion of fractional ownership is still new, despite the fact that there are a number of start-ups in the sector.

There aren't any major players in this area yet, and no rules or guidelines have been made public.

There are also no tried-and-true ways to fall back on. Having several investors might cause friction throughout the entry and leave phases due to disagreements about how to divide up property use, fees, etc.

Due to the potential for shared use of a vacation home, it is important to fairly allocate the associated expenditures of upkeep and repair. When the economy is failing, it's more common for individuals to default on their payments, which ultimately hurts everyone who owns a piece of the business.

However, despite these drawbacks, fractional ownership represents a promising new financial product. Due to the unpredictability of the stock market and the lacklustre returns available on FDIC-insured deposits, smaller retail investors might choose to put their money into more stable real estate.

As the necessary steps are taken, it will become a very practical investing plan.

ALYF is the newest player to enter the Holiday Home fractional ownership sector in India.ALYF intends to be India's first technology-enabled marketplace that facilitates vacation house ownership. It has secured startup money totaling USD 1.5 million headed by 9Unicorns and Venture Catalysts.