Fractional Ownership in Real Estate

Unlocking Real Estate Opportunities with Fractional Ownership

The real estate market has traditionally been seen as a playground for the wealthy, with high capital requirements and significant ongoing costs deterring many potential investors. However, the landscape is changing with the rise of fractional ownership platforms, making real estate investment more accessible and attractive. According to a Knight Frank report, the fractional ownership market is expected to expand by 65% from USD 5.4 billion in 2020 to USD 8.9 billion by 2025. This surge is driven by innovative platforms like Strata, PropShare, hBits, Assetmonk, and MYRE Capital, which are democratising real estate investments.

What is Fractional Ownership in Real Estate?

Fractional ownership in real estate refers to a model where multiple investors collectively own a property, each holding a share proportional to their investment. This structure offers access to high-capital real estates investments, such as commercial properties, luxury residences, and holiday homes, at a lower individual capital commitment. Investors benefit from a portion of the rental income and potential capital appreciation, making it a lucrative option for diversifying their investment portfolio.

Why Choose Fractional Ownership?

  1. Accessibility: One of the most significant advantages of fractional ownership is the lower capital requirement. Investors can enter the real estate market without needing to gather the full purchase price of a property. This model opens doors for smaller investors to own a piece of high-value real estate.
  2. Diversification: Fractional ownership allows investors to spread their capital across multiple properties, reducing risk and enhancing portfolio diversification. This affordable approach safeguards against market volatility and potential downturns in specific real estate segments.
  3. Professional Management: Properties under fractional ownership are typically managed by professional firms, ensuring maintenance, legal compliance, and tenant management are handled efficiently. This alleviates the burden on individual investors and ensures the property is well-maintained and profitable.

Types of Fractional Ownership in India

  1. Joint Development Agreements (JDA): These agreements allow multiple investors to jointly develop and own a property, sharing the costs and profits.
  2. Real Estate Investment Trusts (REITs): REITs pool funds from multiple investors to purchase income-generating real estate, offering a more liquid investment option.
  3. Fractional Ownership Platforms (FOPs): These platforms have gained popularity in India, enabling investors to co-own commercial and residential properties through a digital platform. FOPs manage the property and distribute rental income to investors.

How Does Fractional Ownership Work?

Fractional ownership in real estate is a modern investment approach that allows multiple investors to own and manage a high-value property collectively. Here’s a detailed, easy-to-understand guide on how this process works based on the provided graphic:

Investors Pool Money Online:

  • Collective Investment: Investors come together through an online platform, pooling their resources to invest in upscale residences or commercial properties.
  • Lower Individual Investment: This method allows investors to contribute a smaller, more manageable amount of money than purchasing a whole property individually.

Role of Escrow Agent/Trustee:

  • Fund Management: An escrow agent or trustee manages all the pooled funds. This ensures transparency and security, as the agent oversees the proper allocation and use of the money.
  • Trust and Security: The involvement of a third-party trustee builds trust among investors, ensuring that their funds are handled professionally and securely.

Formation of a Special Purpose Vehicle (SPV):

  • Legal Entity Creation: The pooled funds are used to create an SPV, a legal entity established to acquire and hold ownership of the property.
  • Structured Ownership: The SPV structure helps in clearly defining and managing the ownership stakes of each investor.

Property Management by Fractional Ownership Platform (FOP):

  • Professional Oversight: The FOP manages the property and the SPV, taking care of all aspects of property management, including maintenance, tenant relationships, and legal matters.
  • Operational Efficiency: This professional management ensures that the property is well-maintained and generates steady rental income.

Rental Income Distribution:

  • Income Generation: The property earns rental income, which the SPV collects and manages.
  • Income Sharing: The rental income is then distributed among the investors according to their share in the SPV, providing a regular income stream.

Working of Fractional Ownership Step-by-Step Example Scenario

  1. Pooling Funds:
    • A group of investors decides to invest in a commercial property worth INR 10 crores.
    • Each investor contributes INR 1 crore, pooling INR 10 crores.
  2. Escrow Agent Role:
    • An escrow agent is appointed to manage the pooled funds, ensuring transparency and security.
  3. Creating SPV:
    • The pooled funds are used to establish an SPV that acquires the property and holds the ownership title.
  4. FOP Management:
    • The FOP manages the property, taking care of all operational aspects, including tenant management and maintenance.
  5. Earning and Distributing Income:
    • The property earns rental income, which is collected by the SPV and distributed among the investors based on their ownership percentage.

Challenges and Recent Developments

While fractional ownership offers numerous benefits, it also comes with challenges, such as limited control, liquidity concerns, and legal ambiguities. Shared decision-making and dependence on property managers can reduce investor control. Additionally, co-ownership through an SPV can impact liquidity, as resale opportunities depend on the FOP.

Recent developments by SEBI aim to address these challenges. SEBI proposes that FOPs and entities facilitating fractional real estate investment register as MSM REITs and adhere to specific regulations. Investors can now start with a minimum investment of INR 10 lakh in small and medium REITs, ensuring alignment of manager and investor interests. SEBI also mandates listing units issued by SM REITs, enhancing exit and liquidity options for investors.


Fractional ownership in real estate is revolutionising how investors approach property investments. Lowering entry barriers and providing professional management allows a broader range of investors to benefit from real estate opportunities. As regulatory frameworks evolve and more platforms emerge, fractional ownership is set to become a mainstream investment avenue, offering both stability and growth potential in the real estate market.

For those looking to diversify their investment portfolio with real estate, fractional ownership presents a viable and attractive option. Stay informed, assess the opportunities, and consider this innovative investment model to enhance your financial future.


The information contained herein is for informational purposes and should not be interpreted as soliciting, advertising, or providing any advice.