Tapping into India’s favourite investment option, IIM A alumni create a platform that enables property ownership sharing
In India, investing in real estate is possibly one of the most traditional methods of investment, after investing in gold and fixed deposits. Property Share appeals to that very safe investing option. It is a platform that allows multiple buyers to come together and purchase fractional ownership stakes in a residential property. The company then manages the property on behalf of the owners, taking care of the registration, the finding of tenants and the ultimate sale. Fractional owners get rents and sale value in percentages of their respective ownership percentages.
Kunal Moktan and Hashim Khan the Co-founders of Property Share say they realised there was no avenue to make decent risk-adjusted returns between investing in a fixed deposit at eight percent and equity markets. The only viable option is to invest in real estate, which requires large capital outlays and take out high ticket-size loans.
"As a test case, we purchased a property in Koramangala, Bengaluru for Rs 54 lakhs and rented it out to see what returns we would make. By the time we sold the property, after three years, we had increased rents by 35 per cent and made a 50 per cent return on capital appreciation," says Kunal. This was the duo's eureka moment. They realised this could be a great way for people to own and get returns from a property without the attendant risks of real estate investing.
Problems they address
According to Kunal and Hashim, there are several problems a platform like Property Share solves, which include:
- An individual can invest something as low as five lakhs and yet have an ownership stake in the real estate market.
- Today, with the growth and crowding of the real estate sector, an investment close to Rs 40-50 lakhs gives smaller flats or area in the outskirts. Through Property Share, one can invest about 40 per cent of the same in a better flat rather than 100 per cent in an inferior speculative flat. Thus, providing higher returns and more efficient use of the investor’s capital.
- Improves investment efficiency in the overall market.
- Fractional owners can also sell their share prematurely.
- Personal management is replaced by professional property management saving time and effort
When the duo had decided on working on the concept of Property Share, Kunal was working with The Blackstone Group and Hashim was the head of IT of a large Middle Eastern conglomerate with multi-billion dollar businesses spanning retail, trading and real estate.
Kunal quit Blackstone in 2013 and visited Hashim in Dubai and told him about the plan. Hashim then came down to Bengaluru. "In a span of three days, over breakfast, lunch, dinner and innumerable cups of tea, we discussed the way forward, business plan and Hashim went back and put in his papers," says Kunal. Since its inception, Property Share has already bought four properties, with the fifth one on the way. The revenue and profit has grown fourfold since June last year.
Kunal and Hashim believe they've been lucky as their combination of experiences helped in gaining perspective. Kunal says that between Hashim and him they have institutional real estate investing, asset management experience, and technology expertise to take the platform online. He adds that his real estate investing experience helps them in narrowing down properties and managing them till sale. “Hashim's technology experience has helped us in bringing it to the market through the use of technology,” he said.
"We are the first ones in the industry to bring about this service. Our experience and academic background gave credibility to investors that we could execute such an idea," says Kunal.
Revenue and growth
Property Share charges a percentage of the rents as management fee, a performance fees linked to the return and capital appreciation of the property. A brokerage of one per cent is charged on the resale of an owner fraction. Apart from this, Property Share also manages properties outside their portfolio, for which two months’ rent is taken as management fees.
Kunal believes that the present digital works had helped Property Share reach out to investors who did not have access to investing in real estate in growing cities like Bengaluru, Pune and Mumbai before.
"Every year, 3,00,000 units get sold in India only in top six cities of Bengaluru, Mumbai, NCR, Chennai, Pune and Hyderabad. That is an annual market of USD 50 billion alone. The Indian real estate market is rivaled in size only by China, and as disposable incomes and urbanisation improves this will only get bigger. Our plan is to list and manage 100 properties in the next 12 months and about 1,000 properties over the next three years," says Kunal.
According to IBEF, the Indian real estate sector is said to be one of the most globally recognised sectors. In the past few years, there have been several real estate technology platforms most famous of these are Housing and Commonfloor. Real estate is believed to grow up to 30 per cent in the next year. By 2020, this market is expected to touch USD 180 billion. Reports suggest that the housing sector contributes close to five to six per cent to India's GDP.