With second-home fractional ownership, a highly popular practice in Europe’s richer neighbourhoods and the US, gaining currency in India, doing so would need you to neither break the bank, nor sacrifice returns on investment.
“Fractional ownership of luxury homes, though relatively novel in India, is a well-accepted concept in developed nations,” said Shravan Gupta, founder and CEO, Yours, which specialises in holiday-home ownership. “This concept is swiftly gaining popularity in India too, owing to its numerous advantages, such as simplified investment procedures and efficient property management.”
Distributed ownership of flats, condos, and villas is spurring real estate demand in popular vacation destinations such as Goa, Alibaug, Kasauli, Nainital, and the southern coffee country.
Property industry executives said the holiday home industry is worth around $2 billion in India, and its size is expected to surge to $10 billion in the next few years.
Fractional ownership currently represents a modest 1-2% of the holiday home market. Surge in Interest from Affluent Families | page 9
But following the emergence of numerous platforms post-Covid, this share is anticipated to climb to 10% as distributed ownership costs about an eighth of outright ownership.
There is a notable surge in interest from affluent families looking to make investments in these regions.
“The luxury second home not only appreciates in value, diversifying one’s investment portfolio beyond traditional avenues like stocks and bonds, but it also promises consistent appreciation and potential profit upon resale,” said Dhimaan Shah, founder and COO, Isprava, a property consulting firm.
City Homes a Relative Yield Straggler
Typically, buyers witness two types of returns: Yield-driven return on investment (RoI) and capital appreciation. Gross yields typically fall in the 7-10% range, with net yields at 3-5% depending on the specific microlocation.
The extent of capital appreciation largely hinges on the duration one retains the property, with potential growth ranging from 30%-300%.
Another player in the segment, Equity Address, expects to own Rs 400 crore of assets in the next three years from Rs 50 crore of assets now, said Mohit Gupta, co-founder.
After the pandemic boosted demand for holiday properties, many companies providing fractional ownership have come up to assist buyers in owning a luxury home through distributed ownership.
“Fractional ownership is democratising the ownership of holiday homes, bringing the ultra-luxury experience at a fraction of the cost. This concept has done fairly well in the international markets, with platforms offering a well-researched portfolio to clients,” said Varun Maheshwari, co-founder of Aranayam, which offers limited-edition residences in Goa.
The major platforms in the segment have expanded at a compounded annual growth rate (CAGR) of 30-40% over the past couple of years and are expected to continue their high growth of 25-30% over the next couple of years.
“It offers a cost-effective way for individuals to enjoy vacation properties without the full financial burden of owning an entire property themselves,” said Pratyush Pandey, CEO, Upflex India. “This growth can be attributed to the desire of many people to have a more flexible and affordable way to enjoy second homes in picturesque locations, as well as the potential for investment and rental income.”
Unlike the normal, long-term residential rental properties in India, which typically yield around 2-3%, holiday rentals can offer much higher returns, often ranging from 5-6%.
