The moment we think investment, an array of wealth creation avenues instantly crop up in our minds. A little bit of fixed deposits, a pinch of equity, and a tiny little hint of bonds and debentures.
The thought of real estate as an investment opportunity also comes up, but the high costs involved and associated hassles quickly turn our minds off that concept. One cannot blame the average investor with limited capital to not think too highly of investing in real estate for wealth creation. After all, typically the sector has been tied too closely with the involvement of middlemen, huge initial capital requirement and very low visibility.
Moreover, any real estate investment inherently involves rigorous market research and reconnaissance that decrease its overall attractiveness.
This becomes an even bigger challenge when considering commercial properties. The recent emergence of online broking platforms had brought a sigh of relief for investors and potential property buyers, but even these marketplaces are now brimming with brokers and developers providing sub-standard images, phony numbers and expired listings. Another factor that discourages investors is low visibility and substantially lower liquidity.
Lately, a few players have started channelising technology into the real estate sector to counter the prevailing challenges, giving rise to the phenomenon of PropTech in India. They are using state-of-the-art technologies to bring more transparency and to simplify processes for real estate investments.
Startups like Property Share are even extending unique, scalable and monetisable models that enable retail investors to enter the high growth commercial properties segment.
At present, India has 537 million sq ft worth of rent-generating commercial real estate inventory, estimated at over $70 billion. The rental yields in commercial property are pegged at around 7 to 8 per cent per year and capital appreciation tends to be 10 to 15 per cent.
Just to provide a better picture, fixed deposits tend to generate around 6 to 8 per cent annual returns in total, 10 per cent at best, while, equity is associated with market risks. The biggest advantage of commercial spaces is that they provide higher returns with greater security since they’re booked by blue-chip companies.
These companies have a minimum lock-in period of 3 years and an overall lease period of 9 to 15 years. The contracted escalation of 5 per cent per year in the lease agreement also factors in the inflation and keeps profits afloat.
But these commercial properties continue to be an unlikely investment alternative for common investors of the country. The average ticket size for such investments varies between Rs 5 to 40 crore. Also, such investments demand the ability to analyse and model complex lease structures and cash flows.
There’s also concentration of investment and little diversification opportunity for an interested investment candidate. Perhaps, that is why these investment avenues often remain under the control of institutional capital and ultra high net worth Individuals.
This is precisely where PropTech kicks in. Tech-driven platforms like Propertyshare.in are enabling interested investors to partially invest in risk-adjusted, Grade-A properties leased to multinational tenants.
While granting the complete ownership of an asset (individual share) to its different investors for as low as Rs 10 lakhs, the cutting-edge platform assumes the responsibility of end-to-end processes from due diligence, paperwork, fund liquidity, asset management and tenant search on their behalf.
This ensures unmatched convenience to users in booking, investment, maintenance and sale of commercial property through a centralised and transparent platform.
Everything happens under the technological umbrella, the common investor reaps the benefit of the whole ball of wax from data analytics to visualisation tools and machine learning with their investments.
PropTech is bringing about the perfect confluence of real estate and technology, enabling common investors to make learned decisions with every investment. As real estate gets the taste of its long-awaited technological influx, Indian investors, including NRIs, now finally have an investment option, which is both secure and highly rewarding in nature.
(The writer is co-founder and CIO, Propertyshare.in)