Ownership of land has been considered the most significant asset since ancient times. Recent surveys have indicated that real estate has been an all-time favorite investment option for generations. However, in today’s day and age buying a second home is a distant dream for most people, let alone a holiday home. While REITs solved this problem for investors through fractional ownership, nothing has really been done in the holiday home space in India.

The pandemic was an eye-opener for all of us. Confined to our city homes with little space to thrive, most of us wished we had a holiday home. Some need a quiet place to work, and some need enough space for their children to run and family members to coexist while creating memories.

Our research shows that 78% of individuals earning upwards of INR 30 Lacs annually aspire to own a holiday home. As per our estimates, the current market size in India is $2.5- $3 billion and has the potential to grow to $10-$15 billion in the next three years, if the hassles around ownership and management can be addressed smartly.

This relatively new ball game, called fractional ownership, divides a real estate property into several parts, making it available for a larger number of people. The cost of each property is split between multiple shareholders, along with the rental yield and profit. As the value of the property increases, so does equity and rental income. The property is usually maintained by a third-party management company that looks after the repairs and maintenance and is paid proportionally by the all co-owners of the said property. While this idea has caught some momentum in the commercial sector, there is a lot of untapped opportunity in the residential sector.

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Fractional ownership of holiday homes

Fractional ownership is a fantastic way to own a high-end vacation property without renting it or buying it completely. Ownership of a holiday home should be more about usage than investment. The problem with buying holiday homes for the aspirational middle class is that it’s a lot of money parked in an asset with very little ROI. Our research shows that owners do not spend more than 30-40 days in their holiday homes in a year. While it is a matter of prestige to own one, it doesn’t sound like the best decision unless for the uber rich. We at ALYF, make holiday home ownership accessible and affordable.

It is a revolutionary way of owning a holiday home and is the right choice considering the value-for-money mindset of an Indian consumer. The industry has a lot of scope, notwithstanding the impetus given during the pandemic when people wanted to stay in a home away from home.

Points to consider before investing in holiday properties

Identify the purpose: Understand why you’re looking to invest in a holiday home. Is it for self-consumption or from an investment point of view? If it is for self-consumption, then are you willing to park a humungous amount of your savings in a property that you will use for a maximum of 30-40 days in a year? How about investing smartly through fractional ownership? You get all the benefits of owning the villa with minimal hassles.

Choose the right platform: The concept is relatively new to India, and there is a dearth of credible platforms in the space. Since it is a high-ticket purchase, albeit split between multiple stakeholders, it is wise to choose a platform that ensures complete transparency regarding ownership rights.

Understand the universe of Holiday Homes: There is an overwhelming number of holiday homes available in the market. You have to pay attention to every last detail; the perfect view, the cosy corners, even the way the natural light falls into your home. Most importantly, you have to ensure legal checks have been done. You need to understand the law of the land, title verifications, due diligence, government taxes, etc. before finalising the home. No stone should be left unturned when it comes to legislation and government regulations.

Property Management: Managing a holiday home has always been a hassle, especially considering this home is away from the city and you won’t have the right vendors or the time to deal with the daily wear and tear of your home. It’s important to outsource this with a third-party property management company to ensure your home is always in a pristine condition years later.

Exit when you feel like: You should be able to leave without regrets when enquired. At ALYF, we assist you in selling your share as well. ALYF organised the show around in it’s own network of potential buyers and Channel Partners.

So, to have a long-term investment, which not only reaps handsome incentives but also permits relaxing holiday getaways with family members anytime during the year as per your convenience, then investing in fractional real estate in luxury homes is the veritable choice.

(By Saurabh Vohara, Founder & CEO, ALYF)