Fractional Ownership in Real Estate: Financial Inclusion & Affordable Housing
We believe the core to establishing an effective real estate fractional ownership play in India lies with a player who is going to focus on 3 things:
- A prices micro benchmark (read Real Estate Exchange) for every building/locality in a city that tracks indexes for prices/rates just like the stock exchange to give a transparent visibility of the what is universally acceptable ‘market rates’ so that the so called ‘discounts’ on selling price can be validated as real and not cooked up.
- An effective secondary market platform for market making of illiquid stocks (read exit for existing investors)
3. Allow existing 10 lakh brokers as a distribution network to establish and sell these fractional ownership shares of SPVs in the market to be able to sell using existing relationships.
Obviously technology is the key enbaler for a great execution and we at http://www.oyeok.in are solving this problem of building transaction led real estate exchange like benchmark for fractional ownership to realize the dream of a new India for financial inclusion and affordable housing
One such company in Bangalore that has already forayed into this domain of fractional ownership is playing out in Bangalore and Hyderabad markets http://www.propertyshare.in . But fundamentally they have 3 big issues that still needs attention:-
- High ticket size of Rs 5 Lakhs as still entry barrier
- No details/clarity of the SPV for the public at large creates discomfort for 1st time investor through this route and calls for education
- No mechanism of price discovery at large that justifies the claims on discounted prices or gives transparency to establish trust for an end — investor
In the long run, this new way of financing shall relieve the stress of piling up unsold inventory of the builders in the market, there by lowering the systemic industry risk.
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