Square Yards fractional real estate investment platform to offer upto 14%-15% return

PropsAMC, the asset management services and data intelligence arm of Square Yards, today launched its maiden fractional ownership real estate investment platform, offering a 7%-9% annual entry yield plus property appreciation, targeting a total of 14%-15% XIRR on capital invested over a span of 3-6 years. Through this initiative, SquareYards is planning to build $1 billion worth of AUM (assets under management) in real estate within a span of 3 years.

According to the company, this initiative will open newer avenues for millennials and young professionals to invest in high-grade regular “Income-Generating” properties and secured real estate securities at a fraction of the total price of the property and enjoy attractive returns in a short-to-medium period of time.

“Real estate as an asset class always had the inherent qualities to be owned in fraction. Rental, project financing and early buying can all be held on fraction, provided the underlying asset is fully title secured, rightly valued, and managed by professionals. This can be the biggest alternative investment for investors who like to hedge against pure equity or other debt investments. With fractional ownership, middle-class Indians can now own multiple investable properties with minimum or no development risks and make them a financial instrument to trade in the future,” said Anand Moorthy, Co-Founder & CBO, Asset Management Services and Data Intelligence, Square Yards.

“India’s commercial real estate market has for long been dominated by high net-worth individuals and institutions. Fractional investing aims to break this status quo by making commercial property or “income-generating” investing affordable for the average Indian. With Square Yards’ fractional ownership real estate investment program, investors can build a diversified portfolio at a lower acquisition cost. With rental yields of 7-9% per annum, enhancement of yield by rent appreciation of 4-5% and finally the capital appreciation of 5-8% every three years, fractional investment is the reigning instrument of good faith at present to perform at 14-18% per annum,” said Tanuj Shori, Founder and CEO, Square Yards.

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It may be noted that the minimum ticket size to participate will be Rs 25 lakh, while the present traction or interest accumulated suggests an average investment size of Rs 40 lakh.

“Most of our products will not have any lock-in for investors. We will garner secondary transactions provided there is an interested ‘exit investor’ and periodically publish such interest on our website. Typical cycle of any real estate is 5-6 years where one can maximise returns on such investments,” said Shori.

The company will invest in mainly leased and pre-leased commercial assets, including warehouses, holiday homes and schools.

“We will also explore opportunity with high coupon pay-outs on secured assets in residential space. The charter would be bring periodic yield or coupon along with property appreciation to investors from Day 1 of the investment. We will target cities like Mumbai, Thane, Pune, Bangalore, Gurugram, Noida, Chennai, Goa,” said Moorthy.

All net income generated from the underlying property will be collected in the designated escrow account and distributed based on the investment and area owned by the investor. “The net income will be calculated after the deduction of property tax, AMC fees and sinking fund. The final appreciation at the time of exit will also get collected in Escrow Account and distributed after the deduction of the exit load,” informed Shori.

The concept of real estate fractional investing has attracted the attention of investors as they offer solid yields with predictable cash flows along with capital appreciation in a short period of time, despite market upheavals; something which equity, mutual fund markets cannot assure. It doesn’t carry the volatility of the REITs, which could be due to external reasons or global market sentiments.

Further, every fractional investment option is pre-vetted thoroughly, thus diluting the risk quantum and safeguarding investor monies, and helping the average salary-earning Indian to participate in investments that were once accessible only for HNIs, corporates and institutions.

The present market capitalization of 3 REITs in India is $10Bn with an average annual payout of approximately 6%. The domestic participation in REITs is less than 25%. Similarly, the active real estate focused AIF funds in India are handful and estimated only to be less than $0.5Bn. “The fractional ownership market in India presently is collectively less than Rs 2000 cr between 3-4 players and is pegged to grow multi-fold and surpass $5 billion in the next few years. We believe, with investments as low as Rs 5 to Rs 25 lakh, fractional ownership opportunities will democratize the real estate investment market and become a lucrative investment avenue for a significant section of the moderately risk-savvy Indian populace,” said a Square Yards spokesperson.

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