Square Yards raises Rs 112 Cr from HNIs for office space property in Hyderabad under fractional ownership model

Proptech firm Square Yards, which recently entered into the business of helping investors in having fractional ownership of commercial properties, has raised Rs 112 crore from high net-worth individuals for the purchase of over 1 lakh square feet office space in Hyderabad.

This is the first property being offered by the company to investors for fractional ownership, said Square Yards which is mainly in the property and loans brokerage business.

PropsAMC, the asset management services and data intelligence arm of Square Yards, has raised Rs 112 crore for its first Grade A commercial project in Hyderabad, according to a statement issued on Sunday.

The project is Square Yards' maiden venture into the fractional product category, with an average investment of Rs 40 lakh from a pool of over 250 investors.

"This over Rs 100 crore AUM (asset under management) milestone is a testament to the unbridled faith reposed by investors on our platform," said Tanuj Shori, founder and CEO of Square Yards.

He said the prime focus is to help investors earn lucrative returns through rental income and capital appreciation of the property.

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"We plan to reach AUM of Rs 1,000 crore within the next six months by building a gamut of assets across tier-I cities while focusing on properties that offer better periodic yields and exit returns," Shori said.

The Hyderabad commercial property will provide investors with 8% gross returns on their investment and a targeted XIRR (extended internal rate of returns) of 14-15%, post fees and pre-tax.

In fractional ownership, properties are acquired into an SPV (special purpose vehicle which is a private limited company) and proportional stakeholding of the SPV is allocated to the investors.

Square Yards, the facilitator, will list the assets on its platform and raise funds from HNIs for the acquisition of properties.

Square Yards will serve as the asset manager of the investors, the property, and the SPV.

The tenant continues to pay rental to the SPV on a monthly basis, which in turn gets distributed to all investors proportionately.

Amid the digital transformation of the commercial real estate sector, investing in commercial assets through fractional ownership is slowly becoming popular.

"The fractional ownership market in India is at a very nascent stage and have 4-5 players collectively today, having approx Rs 1,200 crore AUM," said Anand Moorthy, CBO, Asset Management Services and Data Intelligence, Square Yards.

Myre Capital, Strata, hBits, Propcatalyst are the major players in this domain.

Moorthy said the players could start fractional offering in industrial assets, schools, student housing, hospitals, land etc. beyond just commercial assets in the coming years.