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How to own property for just Rs 5 lakh



Co-ownership platforms have made it possible to benefit from investing small sums in realty.
 

For the masses -

Fractional ownership opportunities have opened many doors for the ordinary individual. If your primary objective is capital appreciation, then residential properties make sense. In the commercial space you can expect 7-10% rental yields, while in the last 30 years, yields from residential properties has remained at 3%. However, you need a minimum of `2-3 crore to enter the commercial and retail space. On the other hand, you can enter the residential space with a couple of lakhs.Khadria, who invested `5 lakh in a 3-BHK property near Sarjapur Road in Bengaluru in March 2014, has seen it appreciate by 15%.

Earlier, the fractional ownership realty space was unorganised and individuals invested in property together for joint ownership. Now, startups such as PropertyShare.in are helping organise the market. Another company operating in this space is EstateUp, which offers opportunities in Dubai.

Organised co-ownership

These investment platforms allow you to invest directly in real estate with other investors. Depending on the number of investors, you either get a joint-ownership, or a stake in a company that owns the property.

If the number of investors is less than seven, we go for co-ownership. Otherwise, we form a Special Purpose Vehicle (SPV) with investors as shareholders. You sign a shareholder's and investment agreement that states your investment amount and the fraction of ownership.Your liability is limited to the capital invested by you.

These schemes are different from real estate invest ment trusts where you invest in a pool of properties across asset classes and geographies. Here, you invest in a specific residential property which you can visit and then buy. You also know your co-investors.

As you are investing as a partner in a firm, you cannot take a housing loan. Currently, the minimum investment required is `5 lakh.The maximum is the full property price.Apart from helping investors with the various aspects of property acquisition, these fractional ownership facilitating platforms manage the property for the investors and help them find tenants, negotiate rent and escalations and also the property's sale.

To exit, you'll either have to find a buyer to sell your share in the SPV or wait for the sale of the property. We begin the sale process after three years with a maximum investment horizon of 5-6 years. Once a property is sold, you will receive your share from the exit proceeds.

 

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