How can you own fraction of property by investing few lacs in India with RealX?

How can you own fraction of property by investing few lacs in India with RealXHow can you own fraction of property by investing few lacs in India with RealX?


One cannot invest several Lakhs of rupees in Real Estate. However, one may always have few Lakhs rupees, however investing with such small money in real estate is not possible. One may invest in residential plots, however they may not fetch any regular returns. Recently there was a start-up in Pune which which has come up with super solution of investing in fraction of property in India. They executed their first property transaction for Rs 10 Lakhs. How does this Investment in Fraction of Property work exactly? Is it safe to invest in fraction of property through such start-up company?

Also Read: Best Infra Mutual Funds to invest in 2017-2018

Investment in Real Estate is costliest decision


With the real estate business rendering huge profits, every common man dream to invest in this segment, but when he sees the prices of any property, he takes his foot back.  He always feels to have shortage of sufficient funds to own some property that might fetch him with some profits.

A Pune based financial technical start up has come up with a super fine solution, RealX.

Overview of RealX Start-up company


RealX is an end-to-end online platform that allows fractional ownership in commercial properties. Any person can invest as low as Rs. 1 lakh to own a fraction of property that maybe valued in crores. It is just like any other e-commerce company that allows consumers to transact online. The only difference is that it allows people to invest collectively in a property. The basic idea is that it facilitates small investors to own a big property fractionally and to participate in a high value property transaction.

The first transaction saw around 20 investors pitching in to purchase a 150 square feet shop worth Rs.10 lakh.

Features of RealX which offeres Owning fraction of property in India


Now you can buy property through smaller investments

Buy from savings and not from loans

Hold as you want and sell when you want

Earn rentals (or part rentals) from properties you hold

Create a portfolio of various property investments – across choicest of locations, builders and property type

How does RealX work exactly?


In simple terms, a property that is worth say Rs 1 crore can be collectively bought by 10 investors who can each commit Rs 10 lakhs.

  • One has to register with RealX with their google ID
  • Registered user mobile number is verified
  • Buyer becomes member of Nidhi company by paying registration fees
  • Sign in standard buyer agreement
  • Upload standard buyer agreement signed copy
  • Buyer is ready to transact now
  • Seller registers with relevant property documents
  • Buyer can check various properties and opt for specific property to buy.

How can you own fraction of property by investing few lacs?


The seller or agent post a property for sale and registered buyers commit for the fractional buying of that property. Once it attracts the total revenue required, the sale is executed and co owners become the fractional owner of that property in the ratio of their investment.

How one can buy and sell through this platform?


It is an online platform that brings together the buyer and seller of a particular property. It allows sellers and agents to post a property and registered buyers can commit their co-ownership share of that property. The transaction is considered successful when it attracts the total revenue needed for full sale of that property.

How registration and sale deed is executed?


Once total amount of the property is confirmed, it is executed in favor of the co-owners whose collective interest is represented by a principal custodian, which in this case is a registered Nidhi Company. After the sale deed is registered, co-owners are issued digital certificates that are in proportion of the fractional ownership.

What is digital certificate and who issues it?


Once the sale deed is registered, the co-owners are issued digital certificates for their fractional ownership. These digital certificates are called FRAX.  This part of the transaction is managed by REGKO, another fintech start up that provides asset registry solutions based on distributed ledger technology, commonly known as Blockchain. This technology has inherent benefits of immutability and verifiability of records.

Also Read: Key Features from Real Estate Regulation Act (RERA) of 2017

Drawbacks of fractional ownership


One controversial point of fractional ownership is that after becoming a partial owner, you may want to sell the property but others might not. In that case, your investment gets stuck and you become helpless. Moreover, as you are investing as a partner in a firm, you cannot take a housing loan to invest in such property, although, one can have a personal loan. As you are not taking a home loan, so the usual tax benefits of loan repayment are also not available to you.  The concept of fractional ownership is popular in western countries where few people co-own a vacation house to spend few days in it. But, in India, there is no such culture existing.

Is it safe to invest in fraction of property with such start-up companies?


Regarding the safety measures, the company is fully complied with SEBI, RBI and RERA as they deal with real estate, payments and investments at the same time. The startup has already closed its first transaction of a commercial shop in Satara, Maharashtra. This concept is quite new and unregulated, the guidelines are not very clear. So one should not hurry in investing or if he wishes to, then he can start with the minimum amount. This concept is quite new in India and the founders have to work hard to convince people for investing in it.

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Suresh

How can you own fraction of property by investing few lacs in India

12 comments

  • Vivek

    Hi Suresh

    1. I am in the process of selling my house and will be getting a net sale proceed of Rs. 43 Lac (after loan etc). Am planning to reinvest a part of this money in a property to save on CG tax. I however heard that if I do not reinvest in a property within 6 months, I need to open a Capital Gain tax saver account (with nationalised banks?) 6 months from the sale date with an undertaking that I intend to use the amount to purchase a property 1 year from the sale date. And if I do not open this account and park my funds there, I will be liable to pay CG tax even if i perform a property purchase, say 8 months from my sale date. Is this correct? And which are the banks i can park the funds if yes. Also whats the interest paid on this CG tax saver account?

    2.I have also invested money in MFs. Now if I need a yearly return to take care of my monthly expenses, is it a good idea to put a part of my funds in FDs for guaranteed returns of say 9% PA? If so can I go for company fixed deposits or do you suggest NSC or post office deposits for good interest rates?

  • C.Suresh

    Excellent info and guidance. Thanks.

  • Kuralla

    Hi, Thanks. I saw a similar advst regarding Kapil towers, Gachibowli-Hyderabad. Can you please review and guide us ?

  • Venkat

    Can you bring up your views on the Infosys buy-back announced recently – Pros and Cons, Should retail investors take the bait, what future looks like (in your view) etc can be covered for the benefit of all investors.

  • R Ramakrishna

    I feel it is safer and better to wait for REITS to be promoted by reputed organisations like Godrej Properties rather than RealX

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