Frequently Asked Questions
What is fractional real estate investment?
Fractional ownership in real estate is a term used to describe when a number of investors join together to invest in a real estate asset so that all of them can benefit from a share of the income that the asset generates, and any appreciation in the value of the property.
Why commercial real estate?
Commercial Real Estate is an asset that is worth investing in mainly for the consistent returns and the advantage of multiple income streams. Even when there are vacancies, when a few tenants leave, the investor is not left without an inflow of cash.
There is always the advantage of a consistent inflow of money, especially in the case of multifamily and industrial real estate. Commercial Real Estate has a very high potential to yield financial results, as they come with higher rent and prices. Read on for the benefits of investing in commercial real estate.
Who all can invest?
Any Indian citizen or an NRI can invest with us. Investments from institutions are also accepted. Before proceeding with your investment, it is imperative that all standard regulations are followed
Note for NRI investors : NRI investors can only invest through an NRO or NRE Account or from a normal savings bank account in India, however, your interest distributions and sale proceeds will be credited to your NRO account from where you can transfer it to your NRE account. Please speak to your banker for a more detailed understanding of your specific requirements.
How do I start investing with Investorey
Register on Investorey, choose a property to invest through thorough assessment based on the metrics provided by Investorey. Once the decision is made our investment and partnership executive will reach out to you to process the completion of your investment
Is Fractional Ownership risky?
Yes, as with any investment model, though the risk profiling category is low as per this category of investment. Real estate investment inherent risks including but limited to liquidity and potential loss of capital. Please consult your financial advisor before making any decision
What is the difference between REIT and Fractional Investment?
| REIT | Fractional Investment |
|---|---|
| It is a highly regulated trust fund that limits the expansion of innovative growth models. | It is self-regulated, enabling expansion of the investment structures for investor requirements from balanced to income-generating assets. |
| The Trustee is responsible for holding the assets of the REIT in a Trusteeship for the benefit of unitholders | Investors are co-owners of the SPV against the investment amount whereas the property is managed as per an Agreement between Company and the SPV. |
| With a minimum asset requirement of 500 Cr, the REIT has a limited number of properties that it can undertake. | There is no minimum value that a property has to meet. Instead, the property is selected after rigorous due diligence and ascertaining the returns. |
| Pricing is subject to stock market fluctuations as it is publicly listed | Stable monthly income like traditional real estate investment. Not subject to stock market fluctuations |
| At least 80% of investments made by a REIT need to be in commercial properties that can be rented out to generate income. The remaining assets of the trust (up to the 20% limit) can be held in the form of stocks, bonds, cash, or under-construction commercial property. | All properties are pre-leased and revenue-generating. |
| REIT must distribute not less than 90% of the net distributable cash flows, subject to applicable laws, to its investors. | There is a complete distribution of distributable cash flows, which is calculated after deducting statutory fees and taxes along with our asset management fees. |
| Full valuation to be carried out at least once a year and half-yearly update of the same has to be carried out. | Monthly tracking of rentals and distribution of payment Half yearly valuation report live tracking of assets through analytics |
Is my investment safe?
Your ownership, governance, and compliance records are stored in public databases and government records. Your investment remains completely secure.
Can I invest in more than one property and have a portfolio?
We encourage a diversified portfolio. So, yes, you can invest in more than one property across locations, asset types, and investment tenures.
How does a property gets listed?
Property listing is the most important process and everybody takes it very seriously. A robust, data-driven asset selection process is followed for investors to make maximum returns on investments. Due to our stringent due diligence and evaluation process, only 2% of the total properties analysed get listed on our platform.An experienced team that performs thorough technical and legal due diligence before buying any property is in play whilst engaging with reputed firms to conduct due diligence on the property title.
What is the minimum investment?
The minimum investment is Rs. 25 lakhs. This may vary from opportunity to opportunity. Please refer to the individual opportunity to find the minimum investment price.
What happens if a property fails to be fully funded?
If for some reason a property on the platform doesn't complete its funding target, any funds that have been committed by investors will be reimbursed to the registered/verified bank account along with interest as prescribed in the Expression of Interest.
What are the KYC documents required to begin with the investment ?
Copies of the following documents will be required as part of the KYC process -
PAN Card
Address Proof (Aadhar/Driver's Licence/Passport).
How are the investment Structured?
Investments are structured as private limited companies. For each investment, a Special Purpose Vehicle (SPV) is created in which funds are raised to purchase, own and manage the property. As an investor, you will own shares and compulsorily convertible debentures of the SPV that holds the property and represents your investment. Strata will provide asset management services to the SPV and undertake accounting, secretarial, reporting, and other operational aspects under contract with the SPV.
What is a SPV?
A Special Purpose Vehicle is a legally recognized entity, being a Partnership firm, LLP, a private company, etc., incorporated for a specific lawful purpose. Any investments made for a particular opportunity listed on Investorey will be owned by an SPV being a private limited company that will be set up for this specific purpose.
What is the investment process?
Once the opportunity has been fully funded, you will be required to transfer the remaining amount into your virtual account. Your amount will then be transferred to the SPV account and the SPV will proceed to purchase the property.
What happens if I want to withdraw my initial token advance?
Once an initial investment or token advance is paid, it can be refunded as per terms mentioned in the Expression of Interest that has been signed by the investor.
Is there any lock-in on my investment?
The lock in period is subjected to the Company listing the property
Do you offer any guarantee on returns?
There is no guarantee on any returns. While rental yields on most opportunities listed on the platform are known in advance, a risk that the yield will not be payable will always remain due to underlying real estate assets and leasing risk.On the contrary, we advise potential investors to be wary of any scheme which provides guaranteed returns.
What sort of returns can I expect?
The expected IRR is upto 15% over a period of 5 years. It is very much subjected to the attributes of the property listed.
When is my investment process complete?
It is subjected to the Company listing the property, and can range from 30 -120 days
How are the distributions transferred?
The returns are transferred to the investors in the form of interest on debentures. Rents generated and interest on the security deposit are transferred to your bank account within the 12th of every month subject to the receipt of rents from that particular asset. Details of each investment will vary based on the asset and will be provided to you along with the property details.
Is my investment liquid?
Investors can exit the asset anytime once the lock in period(if any) is served by selling it directly to another investor or by listing it on the platform.
For how long is the Investment held?
Properties will have an investment lifespan subjected to the company listing them which may range from 3-8 years to allow for the asset to appreciate. While an early exit is possible through our liquidity options, this could adversely affect the total return on your investment.
Who takes care of the tenancy and management?
The company listing the asset beimg your asset manager will take care of all aspects regarding the asset.
What does the management fee cover?
The Management fee covers the costs for collection of rents, payouts to investors, TDS filing, GST filing, facilitating property tax payments, compliances of the SPV, and insurance.
What is the contingency reserve used for?
Any unforeseen expenses that arise in the property are met using the contingency reserve. If the reserves are not used, they are refunded back to the investors at the time of sale.
Will there be a management fee when the property is not tenanted?
No, there will be no management fee charged to investors for as long as the property is not tenanted.
What do I own once I invest?
You'll own Equity Shares and Debentures, proportionate to your investment, of the SPV which owns the property.
What are the risks associated with these investments?
The risk profiling category is low as per this category of investment. Various risks associated with fractional investments such as liquidity, tenant, and market risks have been mitigated as much as possible with our robust due diligence and management processes.
What are the costs associated with my investment?
Maintenance fee, Tax, Performance Fee(during exit), Due diligence fee, Acquisition Fee, Legal fee and Reserve Fee. All combined should be 3% of the Investment amount
What are the reporting standards and disclosures?
We believe in 100% transparency in reporting. All property documents, rental agreements, tenancy details, title report, due diligence report, etc. will be available through our dashboard at all times. Detailed monthly financials are also made available through the dashboard.
Should I engage with a lawyer?
There is no need to worry about the legal aspects of your property purchase. Due diligence is taken care of on your behalf. Still, if you want to proceed through legal support, we are always there to assist.
What kind of documentation I need to sign?
You will be required to sign an Expression of Interest and Drawdown Notice before you remit your full investment. This is followed by the Offer Letter and, Share Securities Subscription Agreement with the SPV.
Are investors allowed to see the rental agreement
Yes. All the asset-related documents including the Lease/RentalTenancy Agreement Deed or Leave & License Agreement will be shared with the investors and uploaded on their respective dashboards.
How will I be taxed on distributions?
Yes. The SPV deducts a 10% TDS before remitting returns to Resident Indians and 20.8% for NRI Investors monthly. Resident Indians can submit Form 15G/15H and NRI’s* can submit TRC for reduced TDS.
What are the tax implications on my investments?
For residents, as per the current income tax regulations, you will be paying two kinds of taxes:
Rents: Rents received from the property are distributed as interest on debentures which are taxable directly in the hands of the investors (post applicable withholding tax which can be claimed by the investor at the end of the year).
Capital Appreciation : Capital appreciation is subject to capital gain tax at applicable rates. The applicable tax rate would depend on the period for which the shares and debentures were held(short-term vs long-term).
Short-term Capital Gain will be applicable if the shares and debentures are sold before 24 and 36 months respectively This will be taxed at the rate applicable for the investor.
Long-term capital Gain will be applicable if the Shares & Debentures are held for more than 24 and 36 months respectively. It will be taxed at 20%, irrespective of the quantum of gains. The benefit of indexation may be explored in the case of long-term capital gains. (Holding Period > 2 years for shares and 3 years for Debentures).
Is the TDS deposited against my name?
Yes, the TDS on your distributions is paid and deposited against your PAN and can be claimed back at the end of the year.
What is a TRC? How can I get a TRC?
A TRC is a Tax Residency Certificate provided by the country where you are currently residing. India has a Double Tax Avoidance Agreement (DTAA) with almost all major countries that reduce TDS to lower thresholds of 10-15% (depending on the provisions of the DTAA). However, the benefit of the reduced tax rate is only available to users who are able to produce a TRC. Please speak to your tax advisor on how you can procure a TRC for your country of residence.
I am an NRI. What taxes will I need to pay?
Under Indian Income-tax law, a Non-resident Individual (NRI) is required to pay tax on any Indian sourced or received income in NRO account that exceeds the basic exemption limit, as per applicable slab rates.
NRIs can benefit from Double Taxation Avoidance Agreement (DTAA) entered with their respective country, subject to availability of Tax Residency Certificate (TRC). Please consult your financial advisor for more details as income tax provisions and tax treaties are subject to change from time to time.