Fractional ownership in Indian real estate is surging as private companies offer platforms that allow investors to collectively own property. Assets under management have reached Rs 4,000 crore, with a predicted annual growth rate of 25–30 percent over the next few years. Regulatory bodies like SEBI are developing guidelines to bring transparency and accountability to this market, proposing registration as MSM REITs, listing on stock exchanges, and focusing on completed, revenue-generating real estate investments. This trend represents a significant shift in real estate investment dynamics, democratizing access to property ownership and lowering capital requirements for investors.
A recent report from TruBoard Partners reveals that fractional ownership in real estate is on the rise, with assets under management reaching an impressive Rs 4,000 crore. This surge in popularity can be attributed to the emergence of private companies that offer fractional ownership platforms, giving investors the opportunity to own a fraction of real estate assets. Essentially, fractional ownership involves multiple investors jointly owning a single real estate asset, which not only reduces capital requirements but also broadens the pool of participants in real estate ownership.
The mechanics of fractional ownership involve investors investing their funds in securities issued by a Special Purpose Vehicle (SPV) established by the fractional ownership platform. These platforms provide a formal channel that enables a group of individuals to pool their money and collectively own real estate. Remarkably, the fractional ownership market in India, which includes the total assets managed by all these platforms, has seen tremendous growth, surging from Rs 1,500 crore in 2019 to Rs 4,000 crore in 2023, as per the TruBoard Partners report. The report also predicts a robust compound annual growth rate (CAGR) of 25–30 percent in the assets under management (AUM) of the fractional ownership market over the next 4–5 years.
This growing interest in fractional ownership has caught the attention of both investors and those seeking a taste of luxury living. It provides an opportunity for a broader audience to participate in this unique asset class, which is often beyond the reach of traditional real estate investments. Leading players in the fractional ownership market include Strataprop, Hbits, Myre Capital Propshare, Yield Asset, Assetmonk Strataprop, and PropReturns. But it's not just market dynamics that are shaping the future of fractional ownership; regulatory bodies are also stepping in to provide a framework for its governance.
The Securities and Exchange Board of India (SEBI) is working on regulations aimed at bringing clarity and integrity to the fractional ownership platform landscape. These proposals recommend that such platforms register as Micro, Small, and Medium (MSM) Real Estate Investment Trusts (REITs). Additionally, they require sponsors of these platforms to maintain a minimum net worth of Rs 20 crore, ensuring their active involvement. SEBI's draft guidelines also mandate that units of MSM REITs must be listed on stock exchanges, introducing a new level of transparency and accountability to fractional ownership.
Furthermore, SEBI's regulatory vision outlines specific criteria for asset acquisitions, specifying that acquisitions should range between Rs 25 crore and Rs 499 crore. Importantly, it stipulates that at least 95 percent of the assets under management (AUM) must be invested in completed, revenue-generating real estate, aligning regulatory objectives with investor protection.
In conclusion, the exponential growth of fractional ownership in the Indian real estate market, as highlighted by TruBoard Partners, signifies a significant shift in investment dynamics. The emergence of private companies offering fractional ownership platforms has democratized access to real estate assets, lowering capital requirements and expanding the circle of real estate investors. The projected compound annual growth rate (CAGR) of 25–30 percent in assets under management (AUM) for the fractional ownership market over the next few years underscores its potential.
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