The concept of Fractional ownership is emerging and evolving in India for investors, particularly HNIs, and even end-users, which is helping them to earn steady returns of 8-10 percent from the booming and blooming real estate market, opine industry experts. Fractional ownership claimed to reduce the financial burden on a single investor or owner of the property.
The model of fractional ownership is more popular in developed countries like America, Singapore, and Hong Kong but it is now gaining traction in India. The concept depicts a set-up where a group of like-minded people own a commercial property together and become fractional owners. This approach allows dividing hugely expensive cost into multiple fractions and owing to this millennials are able to participate in new opportunities at a fraction of the cost previously required.
Though co-ownership of high-end property is still in its nascent stage of development, several startups have started offering fractional ownership platforms for both commercial as well as residential assets in India. This new device has started new opportunities for people and has the potential to provide a major fillip to the Indian real estate sector which is witnessing a significant demand for high-value property.
According to the report the fractional ownership market in India jumped from Rs. 1,500 crore in 2019 to Rs. 4,000 crore in 2023. Market experts are saying that, there are several benefits to fractional ownership of real estate, like affordability, diversification, and professional management of property.
One of the top benefits of fractional ownership is that the investment is more liquid compared to traditional real estate, as one can sell his or her shares at any time. Co-founder and CEO of Yours, which offers co-ownership for multiple, one-of-a-kind properties quoted that, “Fractional ownership is a relatively new concept in India and is a smart way to invest in a second home.” He further added, “Each property is owned by a special purpose vehicle, and this SPV can be owned by up to eight co-owners. Each share allows you to use the property for an eighth of the time, or 45 days in a year. In other words, one owns an asset, not a timeshare.”
With the co-ownership of real estate gaining traction, SEBI started considering regulatory framework for fractional ownership. Experts are apprehending that the fractional ownership of real estate is the next big thing after the introduction of REITs in 2007, and a regulatory framework will assist to legitimize the market and boost investors’ confidence.
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