Fractional ownership is a collaborative investment model in which investors syndicate or club together to invest in an asset which otherwise can’t be bought by one or few due to sheer size of the capital investment required. So the investment is pooled together and the income or profit that the asset generates is distributed to them as per their share of invested capital.
Identified investment in a curated asset / property is pooled in a separate Specific Purpose Vehicle (SPV) which could be a Private Limited Company or LLP. For each property investment, a SPV is created with the sole purpose of only owning and operating the specific asset. Memorandum of Association (MOA) and Article of Association (AOA)of this SPV are specifically defined to take care of this aspect and the SPV is governed by a reputed Trustee. Funds are raised by the SPV to purchase the property. As an investor you will own shares of this SPV that represents your investment in the property. Yield Asset facilitates and manages the entire process including the day to day property management aspect while major decisions and distribution of cash flows are managed by an Independent Trustee / Board of the SPV.
We are a tech enabled platform that enables small investors to invest in curated crade-A commercial properties on fractional ownership basis which otherwise are out of their reach.
Before listing an investment opportunity on our platform, our team of experts examine the opportunity on various metrics such as quality of asset, quality of tenant, location, rental yield, lease duration, profile of the tenant and the building, the scope of capital appreciation, micro and macro market indicators, title, etc. A detailed due diligence of title and valuation is done before offering / closing the investment.
Any real estate investment carries inherent risks of loss. However, it has been seen that with a right holding period and carefully selected quality investment options, rental yielding commercial properties have given not only regular return but also capital appreciation. However, please consult your financial advisor before making any decision.
Indian citizens, NRI or institutions can invest subject to the applicable laws and regulations.
Let us know how much investment you would like to do. You have to submit your KYC details to us and we will help to start your investment journey with us. For any queries or technical help, call our helpline no or write an email to firstname.lastname@example.org. We help you invest without jumping through complicated hoops.
To know you are real and eligible to invest, we require mandated KYC documentation which can be uploaded to your membership account online or can be submitted over email to us. PAN Card Address Proof (Aadhar/Driver's License/Passport). Your demat account number.
Property ownership structure via the SPV and Independent Trustee is structured to make your ownership transparent and safe. Your ownership, governance and compliance, returns, income etc. are managed by reputed Independent Trusteeship companies and Escrow banks only as per mandate given to them by the SPV. This structure ensures that complete transparency and full access to keep your investment process, asset ownership and exit secure and transparent.
We do complete due diligence with the help of reputed legal and technical firms. Even though it is not required, we will be happy to answer any questions that would be raised by your counsel if you still wish to engage one.
Under the Property management agreement and the same will be shared with you prior to you making the investing.
Investment in the listed properties that are vetted by our team will be bought in a Specific Purpose Vehicle (SPV) which is a Private Limited company or LLP. For each property investment, a SPV is created with the sole purpose of only owning and operating the specific asset. MOA and AOA of this SPV are specifically defined to take care of this aspect and the SPV is governed by a reputed Trustee. Funds are raised by the SPV to purchase the property. As an investor you will own shares of this SPV that represents your investment in the property. Yield Asset facilitates and manages the entire process including the day to day property management aspect while major decisions and distribution of cash flows are managed by an Independent Trustee / as property manager on behalf of the Board of the SPV.
Each investor owns the SPV in the proportion of his invested amount. The capital structure of the SPV is kept in a way that the investment is tax efficient. A typical SPV structure will allot each investor the following:
5% of the invested capital will be in the form of Unlisted equity shares - Making the investors proportionate shareholders of the SPV and in turn, the fractional owners of the pre-leased commercial asset
95% of the Invested Capital will be compulsorily convertible debentures (CCD)s – The income earned from the property is paid out to the investors by way of interest on the debentures. This interest paid is equal to the rentals received from the tenant.
issuance of the equity shares and convertible debentures will be done through private placement.
Custodian Agreement and Debenture trustee agreement will be signed for the trustee to keep the original documents in their possession for safe custody and manage debentures.
You may contact our team to understand the process in detail.
The minimum investment condition will vary from property to property depending on various factors like total acquisition cost etc. Please refer to the listed property details to get this info.
Once you decide to invest in a particular asset, you will:
Submit your KYC documents if not already submitted.
Execute a Commitment Letter in regard to your investment commitment.
Transfer 5% of the committed amount to a specific escrow account managed by a Trustee and an Independent Bank.
Once property is fully funded, we will send you a call letter to transfer the remaining 95% of your committed investment.
Once the escrow account is fully funded, amounts will be used to complete the purchase and registration of the property in the SPV.
Your proportionate shares in the SPV are allotted in your demat account.
If for any reason whatsoever, a listed property is not fully funded or transaction is not completed due to diligence issues, your funds that are committed and transferred in the escrow account will be reimbursed within 60 days to your registered bank with us.
We have tied up with digital platforms for making the execution of documentation easy for you. You can DocuSign the required documentation.
Once the initial committed amount is paid, it cannot be refunded as the investments are governed by the Escrow account conditions unless the refunds are made if a property is not fully funded.
SPV’s share and debenture subscription agreement.
Confirmation on the property management agreement.
Any other documents as may be required as per legal counsels.
Annual property management fee which may vary from 0.5% - 1% of the invested amount which is collected monthly. Property management may differ based on the property listed Performance fee which may be around 10% above the hurdle of IRR of 8% at the time of sale of the asset. These fees may vary from property to property.
The Property Management fee covers the following services;
Rents collection and payouts to investors,
Tax and other compliance of SPV
Property tax payments coordination
Property insurance coordination
Reporting of various MIS in regard to property and investment.
Any expenses pertaining to the above such as Taxes, Insurance, Valuation expenses, Legal expenses are to be borne by the SPV on actuals.
All property documents, rental agreements, tenancy details, title report, due diligence report, etc. will be available to the investor at all times.Also SPV documents like MOA and AOA, Escrow agreement, commitment letter etc will be shared.
Yield Asset does not guarantee any returns. We recommend that you consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity. Information regarding targeted returns and investment performance, comments, commitment, or statements made do not necessarily reflect views those of Yield Asset or any of its group companies. Forward-looking statements, hypothetical information or calculations, financial estimates and targeted returns are inherently uncertain. Investment opportunities on the Yield Asset Platform involve substantial risk. Real Estate investments have inherent risk-reward, are illiquid in nature and may be impossible to resell during difficult market conditions.
6 months lock-in period is applicable for your investment
Contingency fund is created in the name of SPV to meet any unforeseen expenses relating to property or the SPV owning the property that may arise during the investment holding period. In case reserve is not used, it will be refunded back by the SPV to the investors at the time of sale.
Rental income along with interest on the security deposit proportionate to your invested amount are transferred to your bank account each month after deduction of statutory charges, tax deductions and applicable fees.
A 10% TDS deduction is applicable as per law. Rental income paid as interest on CCDs will attract tax in the hands of the investor based on their individual tax slabs.
Properties will have an ideal invested timeline of 3-5 years. The exit from the investment depends on the terms market factors. However, we will endeavor to best effort to provide early exit options to investors but this may affect projected return on investment.
Based on the recommendations from us, the SPV / investors like yourself, will have the right to participate in all major decisions of the SPV including the exit from the property. This is done based on resolutions passed by the SPV.
Following options are available to you after the 6-month lock-in period :
Resale via Yield Asset Platform/services,
Investors will be able to list and advertise the asset they are willing to sell off and other basic ownership details on Yield Asset resale through their dashboard. Once your units are sold, your sale consideration will be credited in your registered bank account with us.
Investors are free to offer their fraction/share to anybody who possesses a DEMAT account and subject to substantial KYC and administrative rules. Yield Asset will encourage the exchange of possession and on boarding of the client on the platform.
There is no lock-in for an Investor. This means an investor can exit at any given point of time. However, Yield Asset provides an exit option to all investors. Three years down the line, i.e., in 2024 second or third quarter, if 75% of the investors, in a board meeting, decides to exit from the investment/asset, then Yield Asset will find the replacement. Once the property is sold, the amount will be credited into the registered bank account with Yield Asset and ownership will be transferred electronically. However, if the Investor board decides to continue, then the rental flow will be the same.
Income distributed will be taxable in the hands of the investor based on the tax bracket. TDS or withholding taxes will be deducted at the time of distribution. The indicative rates in the current income tax regime is as under: Residential status as per Income Tax Act, 1961 TDS (Withholding tax) rate Resident 10% Non-resident Individual (NRI) Depends on the country they live in and the treaty between the countries.it may be about 10 to 30% (plus applicable surcharge and cess)# #Subject to the availability of a Tax Residency Certificate, you can examine the benefits under Double Tax Avoidance Agreement (DTAA) entered with your country.
Capital gains arising at the time of exit of investment will be subject to capital gain tax at the applicable rate to the SPV. The tax rate applicable will depend on the period for which the securities are held. Indexation benefits can be explored in the case of long-term capital gains.
NRI investors can only invest through an NRO or NRE account or from a normal savings bank account in India. Though, as per guidelines, INR deposits cannot be made into the NRE account. Hence, your share of income will first be deposited into your NRO account from where they can be transferred into your NRE account.
Please consult your tax advisor for updates / changes / applicable tax regime to you. If your total income in India does not exceed the basic exemption limit then the NRI is not liable to pay taxes in India. However, if it exceeds, based on the applicable slab rate, tax will need to be paid You can explore the benefits if there is a Double Taxation Avoidance Agreement between the country that you live in and India. You should have a Tax Residency Certificate to avail those benefits.
You can claim a refund of withheld taxes by filing your income tax return in India.
India has a Double Tax Avoidance Agreement (DTAA) signed with multiple major countries which help reduce the withholding tax rate to a lower slab between 10% and 15%. In order to avail that benefit, one must be able to produce a TRC in the country he/she is residing. A Tax Residency Certificate (TRC) is provided by the country where you are residing.