Fractional ownership of real estate is fast emerging as a promising investment instrument in India for investors, particularly HNIs, and even end-users, which may help them earn steady returns of 8-10 per cent from the booming real estate market, opine industry experts.

While the co-ownership of high-end property is still in its nascent stage of development, several startups have emerged to offer fractional ownership platforms for both commercial as well as residential assets in India. Days are not far when established players in the real estate market too would join the bandwagon, say experts.

This new investment vehicle presents several 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.

A recent report by TruBoard Partners stated that although the concept of fractional ownership of real estate is at a nascent stage in India, it is expected to grow in the next few years aided by tech-driven platforms.

Estimates suggest that the fractional ownership market in India jumped from Rs 1,500 crore in 2019 to Rs 4,000 crore in 2023.

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In simple words, fractional ownership offers investors a way to own a share of high-value property at a fraction of the cost of buying the entire property outright. Even investors with smaller budgets can invest and own shares in high-value properties in proportion to their investment.

According to market experts, there are several benefits to fractional ownership of real estate, like affordability, diversification, and professional management of property.

Another major benefit 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.

“Fractional ownership is a relatively new concept in India and is a smart way to invest in a second home,” said Shravan Gupta, Co-founder and CEO of Yours, which offers co-ownership for multiple, one-of-a-kind properties.

Currently, Yours offers homes in Goa, Alibaug, and the Nilgiris for co-ownership and plans to expand to more locations soon.

Gupta said fractional ownership allows people to purchase a share of a high-value property, such as a commercial building, vacation home, or luxury apartment, at a fraction of the cost of buying the entire property outright.

“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,” added Gupta.

While the shared ownership model in real estate is catching up among investors who are looking for alternative instruments, one of the biggest challenges facing the fractional ownership market in India is the lack of awareness and understanding among investors.

Also, many investors are unfamiliar with the concept and its benefits. Lack of regulatory framework is also acting as a hindrance, point experts.

As co-ownership of real estate has started gaining traction, the market regulator — Securities and Exchange Board of India (SEBI) — is considering a regulatory framework for fractional ownership.

Experts believe that the fractional ownership of real estate is the next big thing after the introduction of REITs in 2007, and a regulatory framework will help legitimise the market and boost investors’ confidence.