Prime commercial projects are no longer the domain of just multimillionaires and multinational companies. They are now within easy reach of common retail investors by way of buying virtual space.

Gone are the days when only select investors could own large spaces or full floors in prime commercial projects. Real estate developers, too, preferred investors with deep pockets since it meant automatically attracting long-term tenants, who provided regular income inflows, in terms of rentals. However, this concept is witnessing a significant change, and unitisations of bigger floors now means they are available for retail investors as well. For example, it is now possible for you to buy 500 sq. ft of a 50,000 sq. ft area as virtual space in a commercial project and enjoy all rights as an owner of the property. This facility has changed the investment pattern dramatically in the commercial real estate segment.

There are two concepts in the commercial property segment:

Lockable: It is just like any other traditional office space owned by someone with keys and other responsibilities. The owner, which can be a person or an entity, will decide whether to use the office space for self or rent it out to another entity, after thorough due diligence for regular incomes.

Non-lockable: A virtual space can be explained as a big area or space where the minimum unit has been defined by the developer and investors can own a part it—the area allotted to them—with all the ownership rights and benefits. Virtual space is registered in the allotee’s name, but there is no concept of handing out the keys of virtual space (non-lockable). The reason being very simple: A virtual space is just a share of a big office space being divided and sold into a number of smaller pieces to few buyers by the developer and hence, sole possession can’t be given to a specific buyer.

The developer or the management usually facilitates all virtual space owners to get tenants. The rent, post developer’s cut, is distributed amongst the owners in the ratio of the area owned by them.

In India, World Trade Centre (WTC) has introduced this concept recently. The first commercial application of a virtual office occurred in 1994, when Ralph Gregory founded The Virtual Office, Inc., and later Intelligent Office in Boulder, Colorado. There is no difference between the facilities and amenities provided for the lockable and non-lockable spaces.

Though it is a new concept in India and will take some time to get popularised, it has been accepted well in a few cities like Ahmedabad and Noida. Demand is also picking pace in cities like Chandigarh. Due to small ticket size, wealth advisors are recommending 10-15 per cent of their client’s portfolio allocation in such concepts.

The Indian real estate developers have come up with unique concepts, designs, styles and quality over time, which is completely in sync with the continuous change in preferences and choices of the buyers. With the government’s infrastructure push, the Indian economy is expected to grow significantly in the coming years, and the commercial real estate segment has a real and huge opportunity to grow.

Benefits of investing in virtual space

Small investment ticket size

The biggest advantage one gets from investing in virtual space is the opportunity to own part of a very large space or area. The same space or area is split into small segments where, by investing a small amount, an individual becomes one of the owners of a large space.

Bring good brands

In the virtual space concept, the developers have a fixed set of global clients who prefer to open or relocate their offices whenever a new location, such as a tower, comes up in other cities. Hence, the developer holds immense expertise of good global brands for rental purpose.

Easy resale

It is easy to find a buyer for small units and due to such benefits; buyers are always ready to grab the opportunity to get hold of these units. Virtual space can be sold like lockable space as well, in which case the ownership of the share of the trust changes hands.

Assurance of regular income

In virtual space, the cost of operating a large area becomes minuscule as the cost is divided between several owners. This gives immense opportunity of enjoying a premium space at a low cost.

Reduced operating cost

Virtual space creates significant long-term opportunity for earning regular rental income, especially from good companies, which automatically leads to higher premium on rental income as compared to surrounding properties.

Higher capital appreciation

With a fixed set of better clients, the appreciation of capital invested is much higher. At the same time, technology-driven virtual space creates long-term capital appreciation.

Part of prime property

Virtual space is not separate from the prime property; rather it is a part of the whole property, but has a distinguished market and demand in the corporate field worldwide.

Professional management

Virtual spaces always come with advanced and high-quality amenities and specifications, which are designed to match the standards of an international corporate office.

IFAN (Independent Financial Associates Network) is a web enabled distribution platform of IFAN Finserv Pvt. Ltd. (ifan.co.in)

olmdesk@outlookindia.com