The real estate sector has been placed as an attractive asset class. we Indians are ardent believers of investing in real estate and even gold. The availability of home loans at competitive rates has made the dream of buying a residential property even more accessible today.
Benefits of investing in real estate:
- In addition to generate wealth through value appreciation, we can build equity, and hedge against inflation.
- It can also provide cash flow with passive income from rental properties.
- It also helps us mitigate risk.
there are many other important advantages of real estate investing that will make a great part of your portfolio
We can Enjoy Tax Benefits Through Depreciation
deduction of upto Rs 1.50 lakh u/s. 80C on of principal amount While the payment of interest is eligible for deduction u/s 24(b)
- the deduction for a Self-Occupied Property is Rs 2.00 lakh
- But if the house is let out there is no restriction to avail a deduction. The actual interest paid is available as a deduction.
Concept of Fractional Ownership in Real Estate
Fractional ownership is an arrangement between a number of individuals intending to invest in a property with a proportional share of investment, and mitigate the risk of, ownership of a high-value tangible asset. One of the main motivators for a fractional purchase is the ability to share the costs and maintaining an asset that will not be used full-time by one owner as it demands limited liability and a minimal investment . It simply means the division of any asset into proportional shares. It has emerged as a key source of real estate earning for India’s middle class people. This is done by creating a LLP or a Company which owns the property then allowing multiple owners or investors to own shares. Those shares can then be purchased and owned by more than one individual. It also allows the transfer of shares without the need to reflect changes on the title or deed to the property, and for tax benefits thus making the exit and entry easy. The main difference is there is no right of survivorship to the sponsor or other owners if one or more of owners were to pass away. Where there are similarities with the equal sharing of operational expenses, rental income and access, the striking difference is free transferability of the owner's interest in the property without regard to the other owners in the property.
This ownership of the property and its deed will also entitle them to certain usage rights, usually in the form of personal use as it affords much of the freedom and usage benefits. In fractional ownership the purchasers owns part of the title and therefore, if the property appreciates in value, they can sell whenever they deem necessary or prudent, releasing the capital growth from their investments.
The key benefits of Fractional Ownership are:
- It is a deeded property.
- Easy exit and entry.
- Demands limited liability and a minimal investment.
- Value appreciation & revenue generation.
- Tax benefits.
The practice of joining together with family and friends to share ownership of vacation property has been around for many years. The fractional property industry started in the U.S.in the early 1990s. In U.S.A, Europe, Africa and many other countries, Fractional ownership has proved to be a success. In India it is in early stages. Many corporate houses have already started implementing this novel concept. The demand for timeshare products in India is likely to grow at approximately 15% per annum from 2019 to 2024, this can have a huge impact on the fractional ownership industry positively. There is no reason for fractional ownership to be unsuccessful. Fractional ownership is a fast growing concept of the holiday/ vacation home segment. In our opinion, it is the appropriate time we should educate our clients to take positive steps in seizing the best opportunities available.
How it works ?
The first and the foremost step is to select a city where you want to invest in a holiday home. We at Prosperria have zeroed on Goa as the preferred destination after doing extensive surveys of many cities to ensure that our clients reap good dividends by investing their hard earned money in a city where there is ample scope of growth.
Why we have choosen Goa?
According to Trip Advisor Traveller Choice, Goa has become one of the most popular destination in Asia in 2019. The demand for luxury holiday home stays has been increasing over the last few years. With the present rate of growth of Goa, we may be on the road to developing a new Asian Dragon. The tourist influx is increasing year after year. So, let us grab this opportunity.
Rio Luxury Homes, Goa
We have entered into an agreement with Rio Luxury Homes, Goa. They have created a number of unique projects across Goa in the last one decade. All their projects have unique designs and styles with Mediterranean elevations and modern interiors coupled with tropical landscape that provide a calm and relaxing atmosphere that lets you be one with nature. In addition to higher appreciation of Rio properties, a hospitality company in the name of Rio Holiday Homes takes care of rental management and house keeping. RHH assures higher rental yields of 7-8 %.
Example of an investment in fractional ownership
Mr. X is having a fund of Rs. 20 Lacs and he wants to purchase a holiday home that can get him a reasonable appreciation along with recurring revenue generation, but he can not find it for this price. The properties of his choice and location are not available for less than a crore. So he approaches us and we have four more persons of his kind who all are interested. Then we shall register a LLP in the name of these five persons and buy the property in the LLP. Their share will be proportionate to their investment. The LLP will enter into an agreement with a hospitality company that will take care of property with respect to up keeping and higher rental yield. The revenue generated shall be shared by all the partners after deduction of commission to the rental management co. All the five partners can avail the stay at the property as per the agreement among them. We assume that the property will appreciate by 7-8% annually and annual rental yield will add another 7 -8% thus generating total ROI of 14 – 16% which is very good by all standards.