Would you be interested in exploring Virtual Property?

You’ve likely heard of the term ‘virtual,’ but when it comes to property, it might make you wonder how something can be both real and virtual. It’s a valid question, considering property is typically perceived as something tangible. However, the concept of virtual property is gaining traction, especially in recent years. Let’s dive into what virtual property is, how it’s sold, and whether investing in it is worthwhile.

What is virtual property?

Essentially, virtual property is real estate that is sold in a digital format, utilizing computers and various supporting technologies. Currently, the market for virtual property mainly focuses on commercial real estate.

Here’s a practical example to clarify: Imagine you have a budget of Rs 50 lakh and wish to invest in commercial property. You find a project you like, but discover that the property price is Rs 75 lakh.

“In such cases, the builder might propose an alternative: offering you 100 square feet on the first floor of the project for your budget of Rs 50 lakh. While the property can be registered under your name, you will get ‘fractional ownership,’ meaning that although you are recognized as the owner, the builder retains control over decisions regarding the rental and usage of the space,” says Pradeep Mishra, CMD, ORAM Developments.

The key takeaway is that once the property is registered in your name, you hold absolute ownership; however, since you have an agreement with the builder concerning the fractional aspect, this type of ownership is classified as virtual property.

Is buying virtual property a wise investment?

“The real question is whether investing in virtual property can actually yield profits. From what I’ve gathered, there may not be significant advantages to investing in such properties. Even though you may have complete ownership, the limitations on how you can utilize that property can be quite restrictive,” says Mishra.

Consider this scenario: you purchase a commercial property, but due to changing circumstances, you find it necessary to set up your own office. Ideally, this property would fit your needs perfectly. However, if you’ve signed an agreement with the builder stating that they will handle the property’s use or rental, this can limit your options significantly.

“What’s the point of owning the property if you can’t use it as you wish? Moreover, there’s always the possibility that the builder markets properties in locations that aren’t appealing to potential renters. It’s also worth noting that builders might impose their own restrictions, such as deciding that the space can only be used for retail purposes. If no one approaches to rent that space for retail, you could end up facing long-term financial losses simply because you’re stuck with a property that isn’t generating income,” informs Mishra.

Overall, these factors make it crucial to carefully consider the implications of investing in virtual property before making a commitment.

Avoid Falling for Ponzi Schemes

It’s crucial to be aware of the potential pitfalls when booking virtual properties. Builders often make alluring promises, such as guaranteed returns and assurances that they will manage space for retailers on a profit-sharing basis. They may claim that properties will be easy to rent out and will maintain occupancy year-round. However, the truth can be quite different.

“Recently, I’ve explored topics like the ‘Ghost Mall’ phenomenon, highlighting the decline in demand for commercial properties, particularly following the pandemic, which has left many shopping malls with vacant spaces throughout the country. In light of this, it’s essential to invest in properties that are free from disputes and have been developed by reputable builders or government agencies,” says Mishra.

Ensure that the documentation is complete and that the construction quality meets high standards, granting you full ownership. Ultimately, the decisions on how to use your property should rest solely with you.