Commercial Real Estate Company In Bangalore

Special Purpose Vehicle' also known as an SPV is an entity/company. Such vehicles are commonly used to invest/acquire assets such as real estate, companies, etc. SPV is a private limited company.

Gross rental yield refers to the annual rental value earned from the leased property. It does not take into account the expenses paid towards the maintenance and upkeep of a property and the taxes levied.

For instance - Monthly rent for a property is Rs 20,000

Purchase value of the property = Rs 50,00,000

So, annual rental income = 20,000 x 12 = Rs 2, 40,000

Gross rental yield = (2, 40,000/50, 00,000) x 100 = 4.8 percent

Net rental yield

Contrary to gross rental yield, the net rental yield includes all the expenses made towards maintenance of the property and taxes levied during the year. However, mortgage interest and taxes are not a part of annual expenses, therefore, should not be considered when computing net yield.

Net rental yield = [(Annual rental income- Annual expenses)/ Property value] x 100

Let's consider that management fee paid to the platform to manage the property during the year is 1% of the purchase value, i.e., Rs.50,000

Net rental yield= [(2, 40,000 - 50,000) / 50, 00,000] x 100 = 3.8 percent

Net Initial Yield = Net operating income (NOI) in the first year of the holding period / Investment cost

The investment cost includes the purchase price plus any other costs spent by the investor for acquiring the property.

Rental top up is an additional incentive given by the investment platform or vendor (Strata/HBits/Myre/ Builder/Developer) from their commission to the investor to make the deal lucrative for the investor. Typically, rental top-up is 0-1% of the amount invested.

Fit-out period is a rent-free period agreed between the parties in which the lessee is not liable to pay the rent and the time duration is used to enable the lessee to install necessary equipment for them to use the property for the intended purpose.

Acquisition cost refers to expenses incurred by a company, individual, or entity to acquire assets, customers, or property. It could be the cost associated with a takeover or merger as well. Cost to acquire comprises legal costs, commissions, and charges.

These are the most desirable and attractive commercial spaces, which are either brand-new or recently developed in a prime area in a major city and business hub. The furnishings, amenities, fittings and infrastructure are top-class. The rental rates are usually higher, indicating the excellent location and high standards of the office space

Capital appreciation is a rise in an investment's market price. Capital appreciation is the difference between the purchase price and the selling price of an investment.

A leave and license agreement is a legal document that enables one party to allow another party to use their immovable assets, i.e., property, for a specific period without any change in the ownership of the asset.

The cost inflation index assists in calculating the long-term capital earnings from transferring or selling capital assets. Usually, while accounting, long term capital assets are filed by their cost price. Therefore, despite the cost of assets constantly on the rise, capital assets cannot be appraised.

As a result of inflation, the selling price of an asset is much higher than the initial purchasing price. Hence the net worth of the asset owner is also likely to increase. The cost of capital assets is higher at the time of sale than it is at the time of purchase. And since the government levies taxes when assets are sold or purchased, the owner of the asset would be forced to pay a higher tax than necessary due to inflation.

This is where the cost inflation index comes into play. This index alters the purchasing price as per the selling price that has increased as a result of inflation. This leads to lower profits and, therefore, lower tax amounts.

XIRR or extended internal rate of return is a single rate of return that provides the current value of the entire investment when applied to each systematic investment plan (SIP)

Commercial real estate gives a higher yield than residential real estate, but individuals have not had the large amounts needed to invest in commercial property. With Fractional ownership this is now possible. Rental yields are high and appreciation is high as well. Investing in Residential assets, often means one needs to take a loan, or wait for some time before the asset starts yielding returns. Most importantly here all one has to do is invest and sit back - earn - track and sell whereas in your residential property you will have to be involved in paper work and other maintenance and upkeep issues and bear expenses too.

Firstly, not all FCRE projects that are launched are good FCRE projects. We evaluate these projects for you and recommend you only the best ones in terms of returns, tenant profile and credibility of the vendor, so that you get the best value out of your investment.

Secondly, we facilitate your investment process and take care of documentation for you so that you can sit back and reap the benefits of your investment.

Finally, we provide all these services to you at ZERO COST, no terms and conditions attached, making sure that your hard-earned money is in safe hands and you enjoy the income TODAY, TOMORROW & ALWAYS

While with an apartment purchase a buyer gets a sale deed that is registered, with fractional ownership one gets share certificates that are registered with the Ministry of Corporate Affairs (MCA). These shares indicate a part ownership of the company that owns the asset in question

There are several companies that float these assets. In addition to these, many builders also sell their commercial assets in the form of Undivided Share (UDS). Before we present any assets to our investors, we first perform due diligence on the company. However, as investments are into a specific investment, we perform a more detailed study on the specific property. We provide an unbiased assessment of the asset and opportunity in question along with its benefits and risks.

No. At this time, no loan is available to buy these assets.

REITs do not allow you the freedom to pick the property to invest in.

• Fractional ownership allows you to diversify and invest in multiple properties in different locations. REITs present a set portfolio with a fixed number of assets in it
• Fractional ownership allows liquidity, and you are free to sell your share whenever you want. REITs cannot be transferred or sold as per the investor's choice.
• There's no minimum value set for investing in CRE via fractional ownership. REITs have a minimum value of Rs 500 crore, which ultimately reduces the options of property.
• Fractional ownership can undertake properties that are under construction or not in use presently. According to SEBI guidelines, REITs must have at least 80% of their investment in income-generating properties.

No. REITs are directly monitored by SEBI whereas FCRE is registered under RERA. However, SEBI has introduced a new framework in May 2023 to regulate online platforms that offer FCRE assets.

In case of tenant bankruptcy, the period to find a new tenant may take around 1-3 months during which no rental income will be generated. Also, once a new tenant comes in, there might be a rent-free period for fitouts, furnishings etc. so rental for those months will also be lost. So total rental loss could be 3 to 6 months. However, that loss can be compensated by higher rental from new tenant.

No, such details are private. As an investor, your profile will not be shared with others without your permission.

All new properties, both commercial and residential, has to be RERA approved.

It varies from deal to deal. However, often rentals are received in the form of compulsory convertible debentures, credited as interest monthly taxed as income.

Investment platform takes care of all property-related management issues, including property tax filing, tenancy management and payments, insurance, and day-to-day management on behalf of the investors.

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 of the asset.

Factors like location, facilities etc. are taken into account and due diligence is done by major real estate consultancies such as JLL, CBRE, Knight Frank among others.

There are exceptional cases wherein the seller or the builder pays rental income even during the fit-out period to the investor to make the deal more attractive to them. But please be noted that if the seller is selling the property due to the fit-out period and has to go to the bank for loan, then he has to pay an additional 2-3% compared to the rental income of 8% that he is paying. Hence depending on the need of the money, they provide this offer since they want to close this deal as soon as possible.

Each property will be acquired in an independent SPV. Each SPV will be used to finance, manage, and own the underlying property. Fractional investors will own proportional shareholding of the SPV that will represent their investment in the opportunity and the underlying property.

No, the assets are acquired under one Special Purpose Vehicle (SPV)/entity and each investor becomes a shareholder of the same entity in proportion to the size of their investment.

This depends from deal to deal depending on the stage of construction of the premises. In cases when these premises are operational facilities for the tenants, constant visits can become a hindrance for the tenant and hence it might not be possible to physically visit the property. However, it may be possible if the premises are not operational at that time.

Yes, all offerings have a minimum lock-in period of 1 year for all investors from the date of registration of the asset. However, we recommend to invest with a long-term plan of 3-5 years at least.

The returns on your portfolio are calculated based on the internal rate of return (IRR) method.

All costs for procuring the asset are communicated in a transparent manner at the time of investment. The rental yield is calculated based on the total cost of ownership. All rents that are received paid out to the investors based on the proportion of their ownership. Deductions here are: Management fee (typically 1%), Tax deducted at source (government mandate). KEY: Knowledge Empowers You to make informed decisions. The responsibility of paying Income Tax is on the investor and the rate will be based on the investor's tax bracket. GST paid by tenant is not counted towards income. At the time of sale of the asset, the asset managers charge a performance fee based on the appreciation of the asset. This ensures that their interests are aligned with those of the investors. The performance fee is asset dependent and should be clarified at the time of investment.

No, we won't charge you any service fee.

No, there will be no management fee charged to investors for as long as the property is not tenanted.

If there is no tenant the CAM and property-tax charges will be borne by the SPV as per actual. This amount will first be taken from the contingency reserve subject to the availability of funds.

As the asset is registered as a separate entity, and platform simply acts as an asset manager, the platform could be replaced by another asset management firm that would continue to provide the same services

MYRE/STRATA/hBits provides multiple liquidity options for the fractional owners on its platform:

• Secondary Market: All platforms have an actively managed secondary market to facilitate secondary sales. You can list your fraction on the secondary market, once an investor expresses interest, they facilitate the transaction and give you an exit.
• Private Sale: Fractional owners can sell their ownership to anybody privately. The investment platform will facilitate the transaction once intimated.
• Final asset exit: Post the initial 3 years, the platform keeps an online poll for all the shareholders in the SPV to ascertain if the fractional owners would like to sell the asset. If at least 75% of the shareholders agree to sell, they will scout for optimal exit options. If shareholders agree to hold, the investment will continue as is, until the next annual poll where the process will be repeated.

Generally, it might take 2-3 months to find a new investor during which you will have to hold your investment.

Any Indian citizen, NRI, company (Pvt Ltd/ Proprietorship), HUF/Trust, cooperative society can invest subject to valid KYC and regulatory guidelines.

You can also create a joint holding. The minimum investment will be taken as a whole. The name on the Equity/ Debenture certificate could be of only 1 investor i.e., either of the two. The rent/interest can be taken into a joint account. Please note the tax liability would be on the primary holder.

Note for NRI investors: NRI investors can only invest through an NRO Account or from a normal savings bank account in India.

As per Strata: If an investor changes his residence/citizenship; the same can be updated in records with required documentation. The impact would be the change in taxation.

As per Myre: In the case where the investor changes his/her status from Resident to NRI, the TDS implication will change accordingly. Moreover, in the case where the investor changes citizenship, we will continue to consider him/her as resident citizen unless they proactive inform us. If the investors inform us, then the securities will have to transferred/sold to a resident/NRI investor.

Nominee can be added to the investment, and the securities get transferred to the nominee in case of any unfortunate events. However, in the case where the Investor doesn't submit details of the Nominee and unfortunately, he passes away, the natural nominee will be 'Next of Kin'.

For Fractional ownership investments, the monthly rentals are treated and accounted as 'income from other sources' - interest income as the pay-outs are structured through interest on debentures. Although it is treated as a rental income for the formed SPV, the same is not true for investors who own fractional shares of the SPV.

For Debt (NCD/LRD) investments, part of the monthly pay-out will comprise of Interest and Principal repayment.

Not mandatory.

In case of Strata, the digital copies of the share certificates are made available on the Investor dashboard for the investors. In case of hBits, they issue physical shares.

In case of Myre: For Debt investment offering in the near future, investors do not require DEMAT a/c. However, depending on the type of offering they may require investors to share details of their DEMAT account. In case the investors don't have a DEMAT account, their Investment Managers can help the investors with the process of opening a DEMAT account on various platforms like Zerodha, Groww, etc.

Once an initial investment or token advance is paid, a termination fee shall apply for any withdrawals. The fee will be as per the terms mentioned in the Expression of Interest.

Monthly distributions to investors are made in the form of 'interest' on CCD and are accordingly taxable in the hands of the investor as per his/her income tax slab rate.

The indicative 'tax deducted at source' (TDS) under the current income tax regime, on such distributions, has been reproduced below:

1. Residents - 10% (plus applicable surcharge and cess).
2. NRI - 30% (plus applicable surcharge and cess)

TDS Certificate will be issued every quarter on behalf of the SPV. The same will reflect in the Form 26AS of the investor.

NRI's can explore benefits under the Double Taxation Avoidance Agreement ("DTAA") entered with the respective country, subject to availability of Tax residency Certificate ("TRC").

PLEASE CONSULT YOUR TAX ADVISOR TO GUIDE YOU.

Capital gains tax is attracted at the time of exit from the SPV on sale of securities of SPV (Private Limited Co). Depending on the tenure of investment it will either be classified as long- term capital gain (LTCG) or Short-term Capital Gain (STCG). The benefit of indexation is available in the case of long-term capital gains for resident investors.

Taxation for Resident Investor: Short term capital gains (STCG) less than 2 years - Taxed as per your tax slab Long term capital gains (LTCG) - 20% with indexation benefit

Taxation for NRI Investor: Short term capital gains (STCG) - Taxed as per your tax slab (30% TDS) Long term capital gains (LTCG) - 10% (No indexation benefit)

PLEASE CONSULT YOUR TAX ADVISOR TO GUIDE YOU.

No there is not, however the returns at the end of the investment are higher as compared to a residential property investment after tax benefit.

To the best of our knowledge, Capital gains tax benefit is not applicable in these investments. However, the returns on such investments compensate for the lack of tax benefit.

PLEASE CONSULT YOUR TAX ADVISOR TO GUIDE YOU.