Proptech brand Square Yards has forayed into the business segment of enabling investors to have fractional ownership of commercial real estate. It has raised Rs. 112 crore from high-net-worth individuals (HNIs) for buying 1 lakh square feet in office space in Hyderabad.
This is the company’s first property that is being offered to investors for fractional ownership purposes. The asset management solutions and data intelligence division of Square Yards, PropsAMC, has raised this amount for its very first Grade-A commercial project in the city. The fractional product category now has a new entrant in Square Yards, with the average investment amount being Rs. 40 lakh from a 250+ investor pool.
The Rs. 100 crore+ assets under management (AUM) landmark indicates the faith of investors in the platform according to the Square Yards Founder and CEO, Tanuj Shori. He also stated that the major objective would be enabling investors to earn attractive returns via property capital appreciation and rental income. He also added that Square Yards is targeting Rs. 1,000 crore in AUM (assets under management) over the next six months, through developing several assets throughout Tier-1 cities, while emphasizing on properties which ensure better exit returns and periodic yields.
Investors will gain 8% gross returns on the commercial property in Hyderabad, along with 14-15% in targeted XIRR (extended internal rate of returns) before taxes and after fees. Properties are acquired as SPVs (special purpose vehicles) for fractional ownership and proportional stake-holding of the same is then allotted to investors. Square Yards will be the facilitator, listing out assets on the platform and raising funds for property acquisition from HNIs. It will also be the investors’ asset, property, and SPV manager. The tenant continues paying rentals every month to the SPV, which will be distributed proportionately across all investors.
The fractional ownership segment is still in its nascent stages in the country, with four or five players having already spent Rs. 1,200 AUM approximately according to the CBO, Asset Management Services and Data Intelligence, Square Yards, Anand Moorthy. Leading players in the segment include Propcatalyst, Strata, Myre Capital, and hBits. Moorthy also stated that there could be fractional offerings across schools, industrial assets, hospitals, student housing, and land, going beyond conventional commercial assets in future years.
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Published Date: 5 March, 2023
