Fractional ownership in premium and luxury holiday properties is growing at a fast clip on the back of double-digit yields. Industry experts say that the demand for such properties has risen sharply in the post-pandemic era.
In fractional ownership, multiple owners own a single property which is either rented out or even for self-use for a certain period of time during the year.
Rental yields in such properties have risen from 6% to 7% before the pandemic to 9% to 10% now due to surge in domestic travel and demand for premium and luxury holiday homes, said Sangram Baviskar, managing director, real estate practice at TruBoard Partners, a tech enabled project management company. In comparison, rental yields in residential properties hover between 3 to 4%.
“The rise in domestic travel has had a cascading impact on rentals of holiday homes. Hence, fractional ownership in such properties become attractive for many start-ups,” Baviskar said.
The premium holiday home market is estimated to be around $1.5-2 billion currently and is expected to touch $8-10 billion over the next few years. Fractional ownership account for 1-2% of the holiday home market currently, and their share is expected to increase to 5% in the next couple of years, he added.
The major platforms in the segment have grown at a compounded annual growth rate or CAGR of 30-40% over the last couple of years and are expected to continue their high growth of 25-30% over the next couple of years.
Another major player in the segment, YOURS, is hoping to own Rs 600 crore of assets in the next three years from Rs 75 crore of assets now, said Shravan Gupta, co-founder and CEO at YOURS.
The 18-month-old start-up has seven such properties and two are already fully sold out. It buys properties and does all interiors before selling it. It allows eight people to own a property and allows them to stay for 45 days.
Some of its properties are only for users and their guests and others can be rented. The minimum ticket size of investment is Rs 60 lakh for investors and properties have an average value of Rs 10 crore.
Another start-up ALYF, which has assets of Rs 65 crore is looking at AUM of Rs 1000 crore in the next two years, said Saurabh Vohara, founder and CEO.
“With many Indians taking vacations, people prefer staycations and rent properties, leading to increase in demand,” Vohara said.
ALYF allows eight people to own a property and has a ticket size of Rs 10 lakh to Rs 50 lakh for investors to invest in its properties.
Anand Narayanan, founder, Alt DRX said that fractional holiday homes as a concept that is fast replacing time share. “This is because time share was considered as an expense by most customers, while fractional holiday homes are real estate investments with a right of use, he said.
Alt DRX plans to launch ‘holiday home investment opportunities, where its users will be able to buy say as little as 20 square foot of a holiday home and enjoy 5 to 7 nights of usage rights in a year.
Santhosh Kumar, vice chairman – Anarock Property Consultants said: “One of the key reasons for its gradual growing demand is that many now look to diversify their investment portfolios and don’t just rely on traditional investment options like fixed deposits, gold, stock market etc. Moreover, at lower entry points, these investors can own a chunk of the luxury real estate and get decent returns which may otherwise not be possible via the regular investment route.”
GOING UP
#Rental yields in second homes rose from 6 to 7% before the pandemic to 9 to 10%
# Major platforms have grown at a CAGR of 30-40% over the last couple of years
# Fractional ownership account for 1-2% of the holiday home market currently,
# Share of fractional ownership is expected to increase to ~5% in the next couple of
