Do you want to own a commercial building or an office or a warehouse in cities like Mumbai, Pune, Bengaluru or Delhi? It’s possible and that too at an investment of as low as Rs 1 lakh, which comes to less than Rs 300 a day, through the fractional ownership model.

Fractional ownership is redefining the rules of real estate in the country. The Indian real estate market is undergoing a whole range of shifts in terms of developments, investments, government reforms, and consumer behavior. Over the last few years, India has witnessed a major shift in digital progress, which has also benefited the real estate market, with internet commerce connecting sellers and buyers across the country.

What is fractional ownership?

When a group of investors come together and buy a specific property by pooling money, they get fractional ownership of the property. The biggest advantage of this investment model is that even an investor with limited resources can participate in group buying and own a commercial property, which otherwise would remain a distant dream for him.

On the affordability quotient of the fractional ownership model, Mananki Parulekar, Co-Founder, Claravest Technologies, says that it allows individuals to invest in both residential and commercial real estate with amounts ranging from Rs 1 lakh to Rs 50 lakh.

Additionally, she said, investors can diversify their investments across multiple locations for various strategic reasons, such as Ayodhya for its potential in spiritual tourism and Panvel as a key area in the development phase dubbed “Mumbai 3.0”. Fractional ownership also enables investors to engage in real estate investment virtually, expanding accessibility.

Tier 2 cities have emerged as major growth drivers and economic hubs. Post-pandemic, companies have revised their strategic approaches and begun to focus on building sustainable working models for their employees, leading to hybrid, flexi and coworking office models. One such emerging phenomenon in the real estate market is fractional ownership.

With the advent of fractional ownership platforms, investors now have the opportunity to put their money into emerging cities where the potential for capital appreciation is greater, using only a fraction of the amount previously needed.

Parulekar also shared her thoughts on key advantages and challenges of fractional ownership in the Indian real estate space.

Key Advantages of Fractional Ownership:

1. Lower Financial Entry Point: Investors can enter the real estate market with significantly lower capital, making it accessible to a broader range of individuals.

2. Diversification: Investors can spread their risk by investing in different types of properties across various locations.

3. Simplicity and Convenience: Managing investments is generally simpler because fractional ownership platforms handle the operational aspects.

Challenges of fractional ownership:

1. Liquidity Concerns: Selling fractional shares can sometimes be more challenging than selling a whole property, potentially affecting liquidity.

Compared to traditional property ownership models, fractional ownership offers a more affordable and flexible approach but comes with challenges such as reduced control and potential liquidity issues. These factors make it a distinct and innovative option for those looking to enter the Indian real estate market.

On how fractional ownership is impacting the accessibility and affordability of real estate investments in India, and what regulatory frameworks or legal considerations are shaping its adoption in the country, she said that fractional ownership is making real estate affordable and accessible for all.

“It is enabling individuals to partake in India’s economic growth trajectory. Recently, SEBI introduced regulations for small and medium REITs, providing a framework for fractional ownership platforms seeking recognition. Despite the novelty of these regulations, there are currently no active SM REITs in the market,” she said. 

However, regardless of regulatory status, investors should thoroughly assess how fractional ownership platforms are mitigating risks associated with specific real estate investments listed on their platforms, according to her.