Fractional Ownership Model Can Help Boost Sluggish Realty Market
Panaji, Oct 20 (IANS) With sluggishness creeping into the real estate market due to the ongoing economic slowdown, a Canada-based group has come up with a unique real estate investment model, which allows investors to purchase fractional ownership in multiple homes, instead of one, which according to the promoters not only significantly divides the risk factor, but also assures more bang for the buck.
Speaking to IANS on the sidelines of the Vibrant Goa investment conclave held near Panaji, Vijay Thomas, founder and chief executive officer of Tangentia Ventures, said the concept of fractional ownership newly introduced in India by FOHO.Haus, a subsidiary of his Canada-based company, works well in tourism destinations like Goa as well as metros, where investors want to purchase second homes, which are used by them occasionally.
“With the sluggishness in the real-estate market, people”s investments are not only costlier, but riskier as well. This means in most cases; you would be investing by taking a mortgage or take a loan. You are basically also not profiting as much because you”re buying more than you need. In case of fractional ownership, you are buying what you need. You will only be needing a second home for a few weeks. So I would say you are not over-buying a home, you”re buying as much home as you need,” Thomas told IANS.
“Also if you buy this house using fractional ownership as an investment, the money you are putting in is way less, so this would be a better risk than an investment in an entire home or even in mutual funds. I would say there is bigger risk in investing in a whole house, than investing in 10 houses,” said Thomas, an alumnus of the Goa Institute of Management, the coastal state”s best B-school.
Fractional Ownership, as an investment strategy, first came into vogue around three decades ago, when globe-trotting businessmen collectively pitched in to co-own ultra-expensive business jets.
According to Thomas, the concept of fractional ownership in the real estate has been prevalent in the US and Europe for the last couple of decades, where the model was used to purchase holiday homes at sought-after addresses like the Hamptons in Long Island, US, or Muskoka in Ontario, Canada.
The Fractional Ownership model designed by FOHO.Haus, enables a person to own a fraction of a house or a property with 12 other individuals, who have similarly opted to. This collective of individuals not only end up physically owning a share of the freehold of the property as an asset – the bricks and mortar, but when one or all of them are ready to sell it at any point in time, there is a realistic shot at making a profit.
Fractional owners can choose four week-long occupancy packages at the time of signing up and FOHO.Haus offers a guaranteed buy back too in case, a co-owner wants to opt out.