The Role of Technology in Fractional Investment in Real Estate

‘Technology’ has a different meaning today compared to one-two decades earlier. Today, technology indicates artificial intelligence, machine learning, and blockchain in the first place.

With that, every industry believes in seeking better growth and empowerment by leveraging these dominant aspects of technology.

The entry of fractional ownership in the field of real estate is significant in itself. And, the role of technology in fractional investment is inevitable in the real estate industry. Being a comparatively new occurrence, fractional real estate investing, too, utilizes technology to provide a new turn to the world of real estate investment. In fact, technology has made it revolutionary.

Overview of Fractional Investment in Real Estate

Fractional investment is a mode of investment that lets you invest in fractional shares of a particular asset without having to invest in the whole asset. So, in fractional real estate investment, you can own a partial share of a high-yielding commercial real estate asset.

Fractional real estate investing is a type of collective investment in a single Grade-A property to reduce the high financial burden on one individual, which is the nature of traditional real estate investment.

By investing in a fractional share of a property through an FOP, you become a shareholder of that property, holding a share of that property with a group of other investors. In this process, you share everything including property management responsibilities, investment risks, profit and loss, etc. with the other shareholders.

Real estate investment was always expensive. Especially commercial real estate investment was attainable exclusively for HNIs and UHNIs. The arrival of fractional ownership into the field changed things to a great extent. With the provided accessibility of individual investors to the area of CRE investment, a new future of fractional real estate investing has been created.

The Role of Technology in Revolutionizing the Real Estate Industry

Real estate is the oldest way of investment in the human world. With the evolution of humanity, new patterns have been established for real estate investment. However, until the inclusion of technology into the field, the growth was slow.

So, the role of technology in revolutionizing the real estate industry is inevitable. The integration of technology in real estate created a new aspect of real estate known as proptech. But, not only proptech, modern technological advancements have revolutionized the entire real estate industry.

Big Data

Big data is a crucial component of technology indicating the unquestionable connection between technology and fractional real estate. Today, finding a property according to the particular requirements of a property buyer is just a matter of a few clicks on the computer or mobile screen. It is because of property listing websites, where you can find a wide database of available properties. Leveraging Big Data has made buying, selling, and evaluating properties much easier.

Virtual Reality (VR) and Augmented Reality (AR)

The application of Virtual Reality and Augmented Reality has drastically changed the scenario of the real estate marketplace by adding online video tours and 360° virtual walkthroughs. This has eased the property buying process by lessening manual labour as well as saving time and money for the property buyer.

Artificial Intelligence

The integration of AI in the property dealing process has rendered the process much easier and more user-friendly. AI-driven algorithms, chatbots, and assistants integrated into real estate websites and fractional real estate investment platforms reduce human labour and speed up the entire process of property dealing and investment. It also helps users find the right properties or services based on their requirements and preferences.

Internet of Things (IoT)

The smart technologies inherent in IoT are leading real estate to a revolutionary stage. IoT-enabled smart systems with inherent sensors play a remarkable role in increasing the convenience of everyday life by enhancing the efficiency of smart home devices. Moreover, from ensuring the safety and well-being of building users to helping in the upkeep of a building, IoT is quite remarkable.

Blockchain Technology

The best-known contribution of blockchain technology in real estate is the securitization of digitized real estate properties, which is called tokenization. Apart from that, it also helps in several other aspects of the broader real estate industry. These include assistance in easy access to project financing models, securitization of mortgages and loans, property management and smart documentation of properties, etc.

Significance of Technology in Facilitating Fractional Real Estate Investment

Fractional real estate investment is a blessing of technology in itself. Since the whole concept of fractional ownership is dependent on advanced technological tools, the role of technology in fractional investment is remarkable.

Fractional investment lowers the entry barrier to the real estate marketplace by allowing investors to invest in fractional shares instead of the entire property. Thus, this investment mode provides a comparatively broader periphery to real estate by letting a larger sum of people enter the field.

And, all this has been possible because of technology. Fractional real estate investment is the result of several collective technological tools primarily including blockchain, digitized fractional ownership platforms, data analytics, virtual reality, and artificial intelligence.

Fractional investment is not about buying, maintaining, and managing a physical asset. It is about buying, owning, and managing digitized fractions of a physical asset. So, only present-day technological advances can facilitate this investment model.

The Impact of Technology on Fractional Real Estate Investment

The impact of technology on fractional real estate investing is extensive. The technology-enabled investment model succeeds in lowering the limitations of traditional real estate investment. By lowering the limitations, it also creates some other factors drawing profits.

Let’s discuss these factors in detail through certain benefits of fractional real estate investment.

Increased Accessibility and Democratization of Real Estate Investments

As we already discussed, the fractional ownership model lets you invest in digitized fractional shares of a CRE asset. Investing in a fraction of the asset instead of investing in the entire asset lowers the investment cost substantially. This increases the accessibility of this investment mode by enabling individual investors to own shares of CRE properties.

Thus, the technology inherent in the process helps break the practice, where only institutional investors and HNIs enjoy the exclusive advantage of investing in real estate. It establishes the democratization of real estate investments.

Enhanced Transparency and Informed Decision-Making

The involvement of technology-enabled fractional ownership platforms contributes to enhanced transparency and informed decision-making on the end of investors.

Due to the comprehensive due diligence process and regulatory compliances involved in the process, investors are now able to analyze their chosen investment platforms. And this ability for proper analysis leads them towards better decision-making, thanks to the remarkable role of technology in fractional investment.

Streamlined Investment Processes and Reduced Costs

Digitization, collective investment approach, and use of blockchain technology have collectively made the investment process streamlined for fractional investment in real estate.

On the other hand, investment costs are reduced here due to two primary factors — investing in partial shares instead of investing in the entire property and a collective investment approach instead of investing individually.

Technological Advancements Enabling Fractional Real Estate Investment

A combination of multiple aspects stating technological advancement makes fractional real estate ownership possible. Take a closer look at those aspects, which sustain a greater role in facilitating fractional investment in real estate.

Digitized Investment Platforms and Online Marketplaces

Digitized investment platforms come in the first place when we talk about technology and fractional real estate investment. Since fractional ownership of real estate is an entirely digital procedure entertaining online transactions and ownership of digitized fractions of physical real estate assets, investment is not possible without such online marketplaces.

Blockchain Technology and Smart Contracts

Digitization of fractional assets is obtained with blockchain technology. FOPs use a process called tokenization to secure this result.

Tokenization is used to represent the shares of a real estate asset as digital tokens on a blockchain. Smart contracts, the blockchain-based programs used to automate the actions, help in the execution of the tokenization process. Thus, blockchain technology is the backbone of the fractional real estate investing model, which opens the way to varied benefits of fractional real estate investment.

Data Analytics and Predictive Modeling

Leveraging data analytics and predictive modeling provides online fractional ownership platforms with a reliable database for performing their due diligence procedure. Thus, these are crucial technological components leading the FOPs along with the investors towards making more informed investment decisions.

Virtual Reality (VR) and Property Tours

Virtual Reality and VR-powered property tours are adding to the investor experience remarkably in current times. In fractional ownership of real estate assets, these technological advancements, help the digitized platforms along with the aspiring investors make the right investment decisions.

Case Studies and Examples of Fractional Real Estate Platforms

Technology impacting greatly the fractional real estate investment sector is not just a belief. Several fractional ownership platforms across the globe have already proven it to be a reality. Presently, in India also, some technology-driven startups are leading the real estate industry with innovative fractional ownership approaches.

Here, we are going to explore some such companies, which have already associated their names with fractional real estate ownership.

Featured Platforms and Their Innovative Approaches

Let’s explore the investment approaches and success stories of ALYF and hBits.

hBits:

HBits, a technology-based fractional real estate investment platform based in Mumbai, lets you invest in top-class commercial real estate properties. It was launched in 2018 with the vision to democratize access to real estate.

The hBits community has been working toward its goal of becoming a global real estate market by making this asset class available to everyday investors. Here, with the smoothness of their technological leverages, investors can invest fractionally at a minimum amount of 25 lakh rupees.

The company offers easy and streamlined investment services encompassing everything including property management and maintenance. As hBits say, they are working at connecting technology and real estate, especially fractional real estate, at one single point.

ALYF:

ALYF is a technology-enabled real estate marketplace based in Mumbai, India. The company follows an innovative co-ownership model, where they offer fractional ownership for holiday homes without the hassle of managing the properties. The investment starts at a minimum of 15 lakh rupees.

The purpose behind ALYF’s innovative smart ownership model is to provide the middle class the opportunity to own Grade-A holiday homes at their convenience. With their technology-driven innovative approaches, they aim at simplifying real estate and making it accessible and stress-free for everyone.

With ALYF, you are promised to have invested in a legally and financially well-vetted property along with extensive due diligence performed regarding the property location. Plus, they provide complete property management and maintenance services. In return for your fractional real estate investment, they also ensure good returns.

Success Stories and Investor Experiences

hBits:

From its inception and till now, hBits has secured 260+ crore rupees of assets under management and 60,000+ registered users. Their success is easily traceable from their customer testimonials, where they clearly express their positive experience and productive returns generated through their investments with hBits. Their presented statistics show that with 72% of local investors and 28% of NRI investors, they have a rich investor community.

ALYF:

At the very beginning of the venture, the company was able to raise $1.5 million in seed funding from 9Unicorns and Venture Catalysts. Since its launch in 2022, ALYF has managed to secure 90 Cr+ assets under management, 200+ happy clients, and 9+ delivered projects.

Future Prospects and Emerging Trends in Fractional Real Estate Investment

hBits:

According to a source, hBits sets its goal to achieve an AUM of 500 crore rupees by March 2024. Thus, they are driven towards bringing trust, transparency, and accessibility into the field of commercial real estate.

ALYF:

According to a source, ALYF authorities mentioned that they had planned to utilize the funds they gathered with seed funding for their business expansion, brand marketing, and technological enhancement. Thus, with its services, the company is aimed at empowering everyone with a limited budget to elevate their lifestyle and grow their wealth by holding shares in their luxury holiday home projects.

Conclusion

By democratizing the real estate marketplace with fractional real estate investment, technology is bringing equality in the field of financial empowerment. Technology-driven tools and techniques have contributed a great deal in redefining the scenario of fractional investment in real estate.

Thus, with the growing popularity of fractional ownership in real estate, a new financial future is finding its way. Being the backbone of fractional ownership, the role of technology in fractional investment will always remain the guiding assistance.

FAQs

What is fractional real estate investment?

Fractional real estate investing is a comparatively new mode of real estate investment. Here, a fractional ownership platform gathers funds from multiple investors to invest in a premium commercial real estate asset. So, in this investment model, a group of investors collectively invest in an asset to obtain shared partial ownership of the invested property according to their investment ratio.

What are the benefits of fractional real estate investment?

Fractional ownership of real estate assets bears multiple benefits for investors. Such advantages primarily include a well-diversified investment portfolio, a reasonable minimum investment amount, convenient liquidity options, good passive income and high returns potential, and professional property management.

How does technology play a role in fractional real estate investment?

Technology plays the most important role in fractional real estate investing. Because, fractional real estate ownership is a result of the recent innovations and developments in the field of technology. Technological resources like blockchain, fractional ownership platforms, data analytics, etc. contribute a great deal to the process and development of the fractional real estate investing model.

What are some of the leading fractional real estate investment platforms?

Some of the leading platforms providing fractional ownership of real estate assets include Strata, hBits, Assetmonk, Property Share, Yield Asset, PropReturns, and WiseX.

What is the future of fractional real estate investing?

Considering the current popularity and traction obtained by fractional real estate investing, the industry can be predicted to have a bright future. With technology fueling the field, we can hope fractional real estate ownership to grow to an unprecedented level.