Highlighting the generation’s preference for flexibility, liquidity, and tech-driven decision-making, Agarwal notes that young investors are carefully evaluating rental yields, property appreciation, and financing costs before making direct purchases.
Speaking to Kshitij Anand of ETMarkets, Shobhit emphasized that the growing appeal of fractional real estate, which offers lower entry costs, diversification, and attractive yields compared to traditional property investment.
For Gen Z looking to build a robust portfolio, Agarwal suggests a balanced approach combining equities, mutual funds, traditional real estate, and fractional ownership to achieve growth, stability, and liquidity. Edited Excerpts –
Q) What is your view on the investment preferences of Gen Z, particularly when it comes to real estate?
A) Gen Z denizens consider real estate when they seek steady streams of passive income to enable more financial freedom.
They want the ability to make their own decisions in a world where jobs are unstable, and prices are rising and see rental properties as a way towards security and freedom from traditional 9-to-5 work schedules. They also use technology to figure out ROI and rental yields.
Social, economic, and lifestyle priorities are changing. Gen-Z investors care more about flexibility, liquidity, and making tech-based decisions than investors from earlier generations.
Gen-Z is different from Boomers and Gen-X in that they want steady rental income for financial security in a job market that is not always stable. They value living experiences, ethical investments, and diversification more than legacy wealth.Q) If a Gen Z investor (who already own a house via parents) is considering spending Rs 1–2 crore on a property, what factors should they evaluate before making a purchase? Or the better bet is to go via investing in fractional real estate?A) They should study how likely an area is to grow in the future, how much rent they can get – it is 5–6% in the best micro-markets – and how much the property could appreciate.An acceptable appreciation rate is 8–10% per year, but can be higher in some markets. Take into account the costs of financing, maintenance, and taxes compared to the benefits of liquidity and diversification.
Buying in such a budget gives you control and leverage. Fractional real estate lets you invest with lower sums, is a good diversification strategy, and leaves more cash on hand.
If you want to have more control over your assets, choose direct purchase. If you want to diversify and make it easy to exit, choose fractional ownership.
Q) What role do rental yields play in making fractional real estate attractive versus traditional property investment?A) Rental yields are very important. Fractional real estate platforms usually aim for annual yields of 5-8%, which is better than most traditional residential investments which give between 3-5%.
Higher yields improve cash flow, which helps make up for fees and market fluctuations. Fractional real estate is a good alternative to direct ownership because it has lower entry costs, involves a wider range of assets, and provides attractive rental returns.
Q) How can young investors balance traditional and fractional real estate investments alongside equities, mutual funds, and other asset classes?A) A good portfolio mixes different types of assets to attain growth, stability, and liquidity. About one-third of the portfolio can be made up of stocks and mutual funds, which have a lot of growth potential and involve a wide range of investments.
About 25% of the portfolio can be in traditional real estate or REITs, which provide leverage and long-term growth. About 15% of the portfolio can be in fractional real estate to assure the investor of access to high-quality assets, good yields, and liquidity.
The rest can be held in cash or liquid debt instruments as emergency reserves and to be able to take advantage of opportunities. The portfolio should be rebalanced once a year to keep up with changing goals and market conditions.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
