A ‘Fraction’ of Ownership = A Growth ‘Multiplier

• A landmark change in residential real estate, the market size of Fractional Ownership is anticipated to grow $5 billion by 2024.

• Average returns are 8% to 8.5% as against 7% to 7.5% in REITs, if only the net yield is factored in.

• Treated as democratisation of residential real estate, it provides investors a control over the property as well as its usage.

• It offers flexibility, convenience and hassle-free ownership

With SEBI’s recent announcement to regulate Fractional Ownership in residential real estate, owning a luxury home is just a ‘fraction’ of share away,” states the latest report by R&R, an independent research wing of Rise Infraventures Limited. The recent announcement of market regulator, SEBI, to regulate Fractional Ownership in residential realty, is being considered as revolutionary for the residential real estate sector in India, with a potential to benefit millions of investors who always aspired for luxury real estate but could not afford it for lack of funds.

An investment approach where multiple investors get together and create a pool of funds, when as individuals, they do not have the requisite funds to buy the aspiring asset, Fractional Ownership, ensures that the cost of an asset is split between multiple investors, and all the shareholders/investors get the benefits of the asset, such as income sharing, reduced rates, and usage rights.

Vishesh Prakash, Head, R&R, explains the trend, “While Fractional Ownership has always existed in India, it was primarily restricted to REITs-driven warehousing and commercial real estate. But now, with SEBI’s recent regulatory framework announced for fractional ownership in residential real estate, a new ray of hope is showing up in the residential real estate. The future looks promising with the Fractional Ownership Residential Real Estate Market set to grow $5 Billion by 2024! Having said that, its important to note that the Fractional Ownership market in India is still evolving, and regulations specific to it may vary across states. As the market matures, there may be additional legal and regulatory guidelines and developments to ensure investor protection and transparency. What’s needed right now is a conscious effort to make an informed choice.”

Talking about its functioning, Fractional Ownership is moderated by a real estate management company that invites inventors to invest a certain amount in a potential asset, and takes benefit from the asset appreciation, while at the same time, ensuring the regular upkeep, maintenance and records of the asset. The investors can go through a range of properties listed on IT-enabled platforms, and make an informed decision. A minimum ticket size is decided as shares, as per the property potential, and accordingly a set of investors/shareholders are invited to choose the portions as per their individual choice and capacity. The shareholders can withdraw their share at any point in time, as per need.

While the Fractional Ownership market in India is still at a nascent stage as compared to the other parts of the world, however, there are clear indicators of its growing popularity. Fractional Ownership allows individuals to invest in high-value properties at a fraction of the cost, making it an attractive preposition for those seeking to own a share in high-end properties.

Besides, it offers benefits such as shared ownership, cost savings, access to premium amenities and locations, and above all, hassle-free transaction and ownership-related processes, while also allowing investors to enjoy the benefits of dream realty without financial burden.

What is awaited now is a clear regulatory framework surrounding Fractional Ownership, though there have been discussions and proposals to establish clearer guidelines and regulations to govern the model, which is expected to give a boost to the buyers’ confidence in the times to come!

Future Beckons: Key Highlights

Scoring over REITs: Fractional Ownership offers Average Returns of 8-8.5% against 7-7.5% in REITs

A win-win for investors: It provides investors a more affordable and accessible way to diversify their portfolios and reduce risks

Higher RoI: It offers two-way RoI – through rental income as well as gain out of capital appreciation