Earn Monthly Royalty on Your Collateral/Land

If you possess collateral or land valued at Rs. 100 crores or more, you have a unique opportunity to earn a significant monthly royalty. This innovative financial model allows property owners to generate a steady income by mortgaging their assets to a bank, under specific conditions, and receiving a royalty for a fixed period. This article delves into the intricacies of this model, its benefits, and the necessary conditions to qualify.

Understanding the Royalty Model

The concept revolves around leveraging high-value collateral or land to secure a mortgage from a bank. Once the bank confirms the mortgage value, the property owner receives 20% of this value as a royalty for a period of five years. After this period, the property is returned to the owner free of any mortgage, essentially providing a risk-free income stream.

Key Features:

1. **High-Value Collateral**: The collateral must be valued at Rs. 100 crores or more.

2. **Royalty Rate**: Property owners receive a 20% royalty on the mortgage value.

3. **Duration**: The royalty is paid for five years. ( One Time )

4. **Return of Property**: After five years, the property is returned to the owner, free from any mortgage.

Conditions for Eligibility

To participate in this model, certain conditions must be met to ensure the security and integrity of the transaction. These conditions include:

1. **Loan-Free Collateral**: The collateral must be free from any existing loans.

2. **Clean CIBIL Score**: The property owner must have a clean CIBIL score, reflecting good creditworthiness.

3. **Litigation-Free Collateral**: The property must be free from any legal disputes or litigation.

4. **Owner Possession**: The collateral must be in the possession of the owner.

5. **Willingness to Mortgage**: The property owner must be willing to mortgage the property to the bank.

6. **Non-Agricultural Property**: The collateral must be non-agricultural land.

7. **Shareholder/Director Agreement**: The property owner must agree to become a shareholder or director in the company managing the transaction.

8. **Pan-India Acceptance**: The collateral is accepted from anywhere in India.

Benefits for Property Owners

This financial model presents several benefits for property owners, making it an attractive proposition for those with high-value assets.

 Steady Income Stream

The primary advantage is the steady income stream provided by the 20% royalty on the mortgage value. This can significantly enhance the owner’s cash flow, providing financial stability and additional investment opportunities.

Risk-Free Transaction

After the five-year period, the property is returned to the owner free from any mortgage. This risk-free aspect ensures that the owner retains full control and ownership of the asset without any long-term liabilities.

No Expense Burden

All expenses related to the transaction, including legal fees, appraisal costs, and administrative charges, are borne by the profile owner (the entity managing the transaction). This means the property owner incurs no additional costs.

 Enhances Creditworthiness

Engaging in this model can enhance the property owner’s creditworthiness by demonstrating a strong asset base and financial acumen. This can open up further opportunities for credit and investment in the future.

 Step-by-Step Process

To better understand how this model works, let’s break down the step-by-step process:

1. **Asset Valuation**: The property owner initiates the process by getting their collateral valued. This valuation must confirm that the asset is worth Rs. 100 crores or more.

2. **Bank Confirmation**: The property is mortgaged to a bank, and the bank confirms the mortgage value.

3. **Royalty Agreement**: An agreement is signed between the property owner and the profile owner, detailing the terms of the 20% royalty payment for five years.

4. **Transfer of Funds**: Upon getting funds disbursed by the bank in account of profile owner , the profile owner transfers the agreed royalty amount to the property owner.

5. **Five-Year Period**: The property owner receives the royalty payments as stipulated in the agreement. ( One Time )  

6. **Return of Property**: After the five-year period, the mortgage is cleared, and the property is returned to the owner, free from any encumbrances.

Legal and Financial Considerations

While the benefits are substantial, it’s crucial to understand the legal and financial considerations involved in this model.

Legal Documentation

All agreements must be thoroughly documented, ensuring that both parties’ interests are protected. Legal counsel should be sought to draft and review these documents.

 Due Diligence

Comprehensive due diligence is essential to confirm the property’s valuation, ownership, and legal status. This involves checking for existing loans, litigations, and verifying the clean CIBIL score of the owner.

Tax Implications

The royalty payments may have tax implications for the property owner. It’s advisable to consult with a tax advisor to understand the tax liabilities and optimize the financial benefits.

Exit Strategy

An exit strategy should be outlined in the agreement, detailing the process for the return of the property after five years and addressing any potential issues that might arise during this period.

 Case Studies

To illustrate the practical application of this model, let’s look at a few hypothetical case studies.

Case Study 1: Urban Commercial Property

Mr. Sharma owns a commercial property in Mumbai valued at Rs. 150 crores. By participating in this model, he mortgages the property to a bank and receives 20% of the mortgage value as a royalty, amounting to Rs. 30 crores over five years. After the period, the property is returned to him free from any mortgage, having provided him with a significant income stream without any risk.

Case Study 2: Industrial Land

Ms. Patel owns an industrial land parcel in Gujarat worth Rs. 120 crores. She meets all the eligibility conditions and mortgages her property, receiving Rs. 24 crores as royalty over five years. This income supports her business expansion plans while ensuring her property remains secure and under her control.

 Conclusion

Earning a monthly royalty on high-value collateral or land presents a lucrative opportunity for property owners. By understanding the model’s intricacies, meeting the eligibility conditions, and carefully managing the legal and financial aspects, property owners can secure a steady income stream while retaining ownership of their assets. This innovative financial strategy can transform how high-value properties are leveraged, offering substantial benefits with minimal risk.

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