Take the fast lane to wealth creation through technology


Technology and innovation have created new business models and new opportunities. The smartphone in our pockets is one of the most voracious business killers. Today, if you look closely at your mobile screen and analyze the different icons, you will realize that each of them may have led to the death of the status quo for an entire industry. Products and services are also susceptible to this carnage.

For example, the innocuous-looking camera icon almost wiped out the physical camera and film industry. The Inshorts icon and his ilk are responsible for the massive bankruptcy and consolidation of print media. Apps like Spotify and Netflix are transforming the entertainment industry (through content production and consumption). Not so long ago (during the days of Harshad Mehta), selling and buying stocks offline was cumbersome, expensive and prone to manipulation. Today apps like Zerodha have made it easy and (almost) free. These apps may have changed the world as we know it. They are ubiquitously available on the Play Store in a democratic way for whole swaths of consumers, bypassing traditional monopoly distribution gatekeepers such as banks, exchanges, trust conglomerates (think Tata, Birla, etc.) .

Have you ever wondered why a brand like Tata is on over 100 products and services? Indeed, in the pre-computer age, the only way to establish credibility was through lineage. However, with online ratings and massive “word of mouth” virality, nimble and efficient startups can quickly achieve scale and size, completely disrupting existing industry setups.

Democratize the real estate sector

However, change does not happen overnight or in isolation. A whole ecosystem of enablers works together to make this happen. Just two decades ago, booking a train ticket was a nightmare. Buying groceries online was unimaginable. Today, this is a reality only thanks to various simultaneous incremental improvements in areas such as internet speed, delivery and logistics operations, Google Maps, payment gateways, smartphones, etc.

One industry that still remains opaque and illiquid is real estate. Although trading platforms have been around for a while, trading is still offline. The paperwork is enormous and cumbersome and the provenance of the title is suspect. Buyers, sellers and intermediaries operate in an environment of mistrust towards each other. Disturbance winds are not far off, however.

Players like BHIVE are democratizing another big industry – real estate – which by some estimates is worth $228 trillion worldwide. Indians are savers and so far largely invested in physical assets like gold and real estate.

According to the RBI report on Indian Household Finance, 84% of wealth is in real estate and 11% in gold. Pension wealth is extremely low and equity participation is miniscule due to trust issues. Less than 2% of Indians have ever invested in stock markets. Real Estate Investment Trusts (REITs) are a great way to participate in real estate, but unfortunately are part of the same tiny capital markets where the common Indian does not participate.

Go beyond traditional investment avenues

In the current scenario, it is surprising to see Indians investing in low yielding DFs, gold and low rental yielding residential properties. Beyond the main residence, people are investing in second/third rental apartments. But the yields are derisory 2 to 3%. The same investment in commercial real estate (CRE) can yield rental returns of around 8-12% and also long-term capital appreciation.

You will be surprised to learn that the biggest commercial property investors in India are global pension funds, international insurance companies and foreign sovereign wealth funds. According to a report by FDI India, real estate investment has increased ninefold and reached a valuation of $1.35 billion. The report further suggests that despite the second wave of the pandemic, the sector recorded $2.7 billion in investments in the first six months of 2021.

However, the Indian middle class has not been able to participate as the ticket amount of each investment is several crores. Also, small investors may find CRE difficult to manage. With the entry of many fintech startups offering fractional investment in CRE, India’s middle class and High Networth Individuals (HNI) are now able to invest in this high-return, low-risk property category that offers transparently phenomenal returns.

Indian retail investors are now able to participate in specific commercial properties in a particular location of their choice. Thanks to technology, they have access to complete information on rents, occupancies, collections, costs, etc. Instead of buying a hard-to-manage apartment in Koramangala, they can deploy their capital in an office building that generates ~8-12 percent net rent after all charges. Additionally, the underlying real estate will also appreciate over time. All of this is available in one click via the BHIVE app now available on Google Play and Apple App Store.

Globally, Fractional Real Estate (FRE) is an established category of fintech and has created many unicorns in the United States, Europe and Australia. FRE benefits from innovations in legaltech and regtech. India is advancing faster than global tech hubs thanks to many proactive government e-initiatives. Technologies such as digital IDs, Aadhaar-based signatures, robust AML audits, automated RoC filings, cloud title registrations and online KYC checks enhance the prospect of seamless market liquidity , convenience for buyers/sellers, and rapid scaling for innovative startups.


About Author

Comments are closed.