Fractional ownership is when multiple investors come together to invest capital in an asset (which could be real estate, airplane, art etc.). It provides investors a percentage ownership in an asset, which gives proportionate rights in the income and capital value appreciation of the asset. It is a simple way to own an expensive asset, by splitting the ownership.
Fractional ownership of real estate splits the ownership of high value property into smaller fractions to provide alternative investment avenues to retail investors along with proportionate ownership rights in the asset.
It’s a traditional concept and the simplest example of this is owning shares in a company, through which you have a fractional ownership in the company.
NCDs stands for Non-Convertible Debentures. It is a fixed-income or debt investment issued by companies to raise funds from retail investors, financial institutions and high-net-worth individuals at a fixed interest rate for a pre-agreed period (or Tenor). NCDs are non-convertible meaning that they cannot be converted into equity shares of the company and hence offer a fixed return which is paid on a monthly, quarterly, semi-annual or annual basis over the Tenor.
Secured NCDs are secured by assets owned by the company, which can be sold to recover the investment. All the NCDs listed on The Restack platform are secured by real estate assets in the form of land, plots or apartments.
You can read more about NCDs and how they work in our blog. Available in the Restack Insights on resources section of the website.
The Restack is an online technology platform that provides users access to a curated set of real estate investment options and enables them to invest in any of the investments basis their selection.
Yes, all the investments are fully secured by underlying real estate.
1. Fractional Ownership: Such investments offer a fractional ownership in the underlying real estate. The real estate can be office, retail, warehousing, data center or residential assets. Such assets could either be operational (stabilized through a long-term lease) or under construction. Comprehensive details are available under the respective opportunity sections.
2. Debt investments: In case of NCDs investments, these are backed by mortgage of the underlying real estate asset.
None of the investment opportunities showcased on the platform are unsecured.
Yes. All investment opportunities showcased on the platform, either fractional ownership or Debt investments have real estate as the underlying asset, through ownership or mortgage in each structure respectively.
We believe that real estate is one of the most tangible asset class offering adequate security.
REITs, or real estate investment trusts is a trust that owns various income producing real estate. The REIT Manager has discretion to manage these assets on behalf of the REIT unitholders or investors. As per regulations, it is required to invest majority of the capital in completed assets and distribute at least 90% of the distributable income from these assets.
The key differences between REIT and fractional investing are,
1. Fractional investing involves investing in a particular asset in a particular micro-market with a particular risk profile. On the other hand, REITs are diversified across a pool of assets across geographies.
A simple way to understand this difference is investing in a particular stock versus investing in a sector specific mutual fund. Investors have their own views on each type basis individual specific risk appetite and invest across both basis their risk profiles.
2. In fractional investing, you can choose your investments across assets or geography. In REITs, the REIT manager has discretion to manage the investments through buying or selling assets.
This makes fractional investing more customizable in terms of portfolio creation and diversification across asset classes. At present REITs in India are more asset class specific.
3. REITs, listed on stock exchanges, are more volatile in terms of the price movements. On the other hand, fractional investing is less volatile when compared to REITs.
REITs have a lower investment amount and hence are more liquid as they trade on the stock exchanges.
4. Fractional investments are more illiquid, but our platform aggregates demand to facilitate secondary transfers of fractional investments.
5. At present, REITs are more asset class specific and only office REITs are available. On the other hand, fractional investing allows investors to customize their real estate portfolio from a more diverse pool of investments across asset class like office, warehousing and other emerging asset classes.
The company (Realtystack Private Limited) is registered as a broker/agent under the Real Estate Regulatory Authority (RERA) for showcasing these opportunities on a technology platform. Our RERA registrations are:
Karnataka: PRM/KA/RERA/1251/310/AG/211203/002658; and
The technology platform is only a medium to showcase curated investment options only to the platform’s registered users. The company will never give any investment advice or recommendation in respect of the opportunities listed on the website or for subscription to the securities and under no circumstances should the information on this website be used or considered or deemed as an offer to sell or the invitation or solicitation of an offer to buy any product or service offered by us. The investor is required to make their own independent assessment (or through their counsels) on the attractiveness of the opportunity, vetting of the diligence reports provided and conducting their independent diligence as they deem fit.
Resident Indian, Non Resident Indian (NRI) and Overseas Citizen of India (OCI).
Each investment is held in a special purpose vehicle (SPV), which will be a private limited company. In a private limited company, the Investors are issued shares and debentures of the SPV holding the asset, which represents their investment in the SPV.
No, the property or asset is registered in a separate SPV setup specifically for the purpose of acquisition and holding the particular asset.
As mentioned above, the title to the property is in the name of the SPV. In terms of your fractional ownership, you will be issued ownership in the specific SPV holding the property, proportionate to the amount invested. The proportionate ownership in the SPV is represented in the form of securities issued to you. The above structure enables a user to get fractional ownership of the property.
No. Many companies and individuals have historically and continue to hold properties through property specific SPVs. Investment in a property through the SPV route for property ownership provides the same interest in the underlying property as direct ownership of property and does not legally impact any title interest in the property.
Investment is made through subscription of shares and debentures in the SPV in compliance with applicable laws.
Term sheet, subscription agreements and other related agreements will be executed.
Only Resident Indian.
NCDs will be directly issued to the Investors by the developer (issuer) who is borrowing the money. These NCDs will be credited to the investor’s demat account and will be secured through the security as detailed under the specific Debt investment opportunity.
No, the property is mortgaged in the name of the Debenture Trustee, who will hold it on behalf of the NCD holders and at all times the trustee will represent the interest of all the NCD holders.
There is no title interest since it’s a debt investment. Only security is created in the name of the Debenture Trustee to secure the interests of the NCD investors.
NCDs or Non-Convertible Debentures.
Term sheet will be executed.
Yes. The Restack strives to make property investment as simple, seamless and transparent as investing in stocks. Hence the entire investment process for the investor is paperless right from KYC compliances, accessing property diligence reports and execution of transaction documents.
We ensure that all investment information and diligence reports are made available upfront to enable your investment decision. Hence the investment process is completed in a few days rather than the traditional real estate investment process which takes a few months.
The token amount is 5% of your total investment amount. A term sheet will be executed at the token payment stage.
Until the investment opportunity is fully subscribed, your funds are kept in a separate escrow account and will be held in trust. These funds are completely ringfenced from the operations of the Company and are safely kept in a legal escrow operated by a Trustee.
The registration of the property in the SPV is done as soon as the investment opportunity is fully subscribed and will be completed within the window period starting from the day the opportunity goes live for investment. The window period is mentioned under each opportunity and is around 60-90 days.
No, as the property is being registered in an SPV, you will not be required to go for the registration. Authorised representatives of the SPV will complete the property registration compliances.
No, the Debenture Trustee will complete the mortgage registration compliances and will hold it in its safe custody for the NCD investors.
In such a case, we refund the entire investment amount made till date back to the investor.
No. Any payment made towards an investment opportunity, which gets fully subscribed, is non-refundable.
As of now there are no loans that can be taken to finance a portion of the investment amount.
Yes, there would be a minimum lock in period on the securities subscribed by you as provided in the relevant transaction documents for each of the investment opportunity.
No. The returns are not guaranteed.
All returns are projections and are subject to changes in macroeconomic conditions, tenant default, vacancy, leasing risk, changing real estate market conditions, development risk, change in real estate regulations, title/litigation risk, approval risk, cash flow risk, liquidity risk, default risk etc. We advise investors to undertake their independent assessment (or through their counsels) on the attractiveness of any opportunity, vetting of diligence reports and independent assessment of projected returns.
The Restack will never recommend/advise/solicit any investment. The company is merely providing a platform to showcase curated real estate investment opportunities.
No. All returns, including yield and returns, are shown on pre-tax and on gross basis.
The company or its affiliates provide certain property services in relation to real estate asset held in the SPV. The scope of the property services is summarized below:
1. Co-ordinating the property management (through 3rd party property managers) including management of lease, refurbishment (if required) and other activities that may be required for upkeep of property (like property tax payments). Actual costs for point 1 and towards brokerage, refurbishment and property tax will be charged to the SPV.
2. Negotiations and management efforts with existing lessee.
3. SPV compliances, audits and tax filings. (not including applicable taxes in SPV)
4. Co-ordination efforts for rent transfers from lessees to SPV and then to investors.
The property services fee charged covers cost for SPV’s compliances such as tax filings and audit expenses, rent transfers, use of the technology platform for portfolio management and property updates, management costs for coordination efforts with existing lessees. The property services fee is only being charged for commercial property investment opportunities listed on the platform.
Each user has access to a digital portfolio dashboard attached to their user account which provides information regarding the performance of their investments including distributions, returns details and property updates.
Investor voting required for key decisions regarding the property is also done through the Portfolio section.
In such an event, there would be no rental income/ distributions to the investors during the period the property is vacant. The company’s asset management team works with occupiers, brokers and operators to find a suitable tenant for the property.
Certain key decisions to be undertaken by the SPV like re-leasing, property sale or property refurbishments are carried out based on decisions taken through voting by the investors in the particular investment. A decision is taken basis a simple majority concept, unless a higher threshold is prescribed under applicable laws.
You can list your investment for resale through the secondary market on the platform where we find suitable bids against your offer for sale.
Alternately in the case of fractional ownership, after a certain number of years, the investors can vote to sell the SPV or the asset to another financial investor or operator.
In the case of debt investment, as it is for a fixed tenor, the entire principal invested would be repaid during the tenor as per the agreed terms set out in the debenture agreement.
Please note that the investment is subject to a minimum lock in period as provided in the relevant transaction documents for each of the investment opportunity.
Yes, the digital platform enables you to list your investments for exit/resale after the lock-in period. We try and aggregate demand for your offer for resale through bids from other interested investors.
The secondary marketplace captures all the bids and offers with regard to any investment and enables a seamless transfer in case of convergence.
The platform does not guarantee exit and merely facilitates a sale once a suitable buyer is found for the investment listed for the exit.
Yes. In such an event, the user may contact the relationship manager to help facilitate the transfer.
The assets are held in specific SPVs which are separate distinct entities from the company or the tech platform. There would be no impact to the specific SPVs if the platform ceases to operate.
In an event that the platform ceases to operate, the Company would cease to provide asset management services. In such a scenario, the Company will assist the investors in engaging a third-party entity to provide such services to ensure continuity and sustained operations of the SPVs.
There would be no impact on the Debt investments as the NCDs are directly issued to the investors and a debenture trustee mediates between the developer (issuer) and the NCD holders.
We charge the following fees,
1. One time Acquisition fee of up to 3% on Capital invested at the time of investment. This forms a part of the property acquisition cost.
This is towards the costs for deal origination, research, brokerage fees and deals screening. Only a few deals pass through our stringent underwriting standards, which are eventually then offered to you on the platform.
2. Property Services fee of 1% per annum on Capital invested payable monthly.
3. Performance fee, which is a percentage of the upside over the investor reaching a hurdle IRR. Please refer to respective investment opportunity details on the website.
1. One time Origination fee ranging between 1% to 2% on Capital invested at the time of investment. This is being charged from the issuer and not from the investors.
2. Property Services fee of up to 1% per annum on Capital invested can be charged from the investors. Please refer to the investment opportunity documents.
Yes, TDS is deducted as per applicable laws.
The investors receive distributions from the SPV in the form of monthly interest on the securities (debentures) held by investors in such SPV.
TDS certificates will be provided to you on a quarterly or semi-annual basis.
The distributions are taxable in the hands of the users as per the user’s respective tax bracket. Further, distributions would also be subject to a deduction of tax (TDS) at a rate of 10% before remitting to the user.
A TDS certificate will be provided for any tax deducted at source on a quarterly or semi-annual basis and such TDS would be available as a credit to the Investor.
The tax implications provided herein are provided on an indicative basis and users are advised to consult their respective tax experts with respect to any tax related matters.
Any amount received by an investor through exit of investment would be taxable as capital gains in the hands of the investor.
If the investment in equity shares is held by the Investor for a period greater than 24 months, such capital gains would be treated as long term in nature and taxable at 20% (plus surcharge and cess), subject to indexation
If the investment is held by the Investor for a period less than 24 months, such capital gains would be treated as short term in nature and taxable as per the user’s respective tax bracket
If the investment in debentures is held by the Investor for a period greater than 36 months, such capital gains would be treated as long term in nature and taxable at 20% (plus surcharge and cess).
If the investment is held by the Investor for a period less than 36 months, such capital gains would be treated as short term in nature and taxable as per the user’s respective tax bracket.