Fractional Ownership in Real Estate: A New Way to Invest

by KarNivesh | 14 August, 2025

The Indian real estate market is witnessing a quiet revolution, and it’s being driven by an investment model that was once reserved for the ultra-wealthy—fractional ownership. This innovative approach is opening doors for everyday investors to own a share of premium commercial and residential properties without having to commit crores of rupees upfront.

With the fractional ownership market valued at $500–600 million (₹4,160–4,992 crore) and projected to grow tenfold in the next five years, it’s clear that this trend is reshaping how Indians think about property ownership, wealth creation, and passive income.

Visual comparison of traditional and fractional real estate investments represented by skyscrapers and a single house held in hands.

What is Fractional Ownership?

Imagine you and nine friends want to buy a luxury apartment worth ₹2 crores. Instead of each person struggling to finance the whole property, you each invest ₹20 lakhs and collectively own it. Unlike a timeshare—where you buy only the right to use a property—fractional ownership gives you legal ownership of a part of the asset, complete with a deed, income rights, and capital appreciation potential.

It works much like buying shares in a company. Here, however, your “company” is a tangible property—an office building, a warehouse, or a luxury apartment—that can generate rental income and grow in value over time.

How Does It Work?

The process is straightforward:

1. Property Selection – Platforms identify high-value, income-generating properties such as Grade A office spaces or luxury residences.

   
   

2. Legal Structure – A Special Purpose Vehicle (SPV), usually a private limited company or trust, is created to hold the property.

   
   

3. Share Division – The property value is split into equal shares representing specific ownership percentages.

   
   

4. Investor Participation – Multiple investors buy shares based on their budget.

   
   

5. Income Distribution – Rental income and any capital gains are shared in proportion to ownership.

   
   

Step-by-step guide to fractional real estate investment in India

Why Fractional Ownership is Growing in India

Several factors have fueled this rapid growth:

• Rising Investor Appetite – Higher disposable incomes and better financial literacy are pushing people to explore alternatives beyond stocks and FDs.

• Tech-Driven Platforms – Digital interfaces now make fractional investing easy, transparent, and secure.

• Regulatory Recognition – SEBI’s Small and Medium REIT (SM REIT) framework, introduced in March 2024, brought formal regulation to fractional ownership platforms—building trust and investor confidence.

SEBI’s SM REIT Framework: A Game Changer

The new SM REIT regulations are designed to bring more structure and safety:

• Minimum asset value reduced to ₹50 crores (from ₹500 crores for traditional REITs)

• Minimum investment threshold set at ₹10 lakhs

• Mandatory independent valuations and compliance checks

• Regular investor reporting and potential for stock exchange listing for improved liquidity

Modern commercial office buildings representing potential assets for fractional real estate ownership.

Key Benefits of Fractional Ownership

1. Lower Entry Barriers – Instead of ₹2–5 crores for a prime property, you can start with ₹15–30 lakhs.

2. Premium Asset Access – Invest in high-quality office buildings, luxury homes, or retail complexes.

3. Attractive Returns – Commercial properties can deliver 7–9% annual rental yields and 12–17% IRR over time.

4. Hands-Off Management – Professional managers handle tenant issues, maintenance, and legal compliance.

5. Portfolio Diversification – Spread your investment across multiple cities, asset types, and tenants.

   
   

Comprehensive comparison of real estate investment options in India

Risks and Challenges

Like any investment, fractional ownership is not without drawbacks:

• Liquidity Issues – Unlike listed REITs, selling your fractional share can take time.

• Shared Decision-Making – All owners must agree on major decisions, which can cause delays.

• Regulatory & Market Risks – Although SEBI regulations exist, the framework is still evolving.

• Tax Implications – Rental income is taxed under “Income from House Property” with capital gains rules similar to direct real estate ownership.

Fractional Ownership vs REITs

While both allow indirect property investment, they differ significantly:

Aspect	Fractional Ownership	REITs
Property Selection	You choose the specific property	No choice—predefined portfolio
Minimum Investment	₹15–30 lakhs	₹15,000–50,000
Liquidity	Low–Medium	High (stock exchange traded)
Returns	9–17% potential	6.5–7.5% stable
Control	Limited say in decisions	None

Choosing fractional ownership if you want more control, higher returns, and can lock in funds for 3–7 years. Opt for REITs if liquidity, diversification, and low entry points matter more.

How to Start Investing in Fractional Ownership

1. Research & Learn – Understand terms like SPV, IRR, rental yield, and exit strategy.

2. Select a Trusted Platform – Look for SEBI registration, proven track record, transparency, and fair fee structures.

3. Do Your Due Diligence – Verify property location, tenant quality, legal clearances, and projected returns.

4. Invest & Monitor – Complete KYC, transfer funds, and track rental income and property valuations.

Popular Indian platforms include Strata, PropShare, hBits, Claravest, and BondsCapital.

Success Stories & Market Trends

• NRI Surge – NRIs invested over ₹2.57 lakh crore in Indian real estate in H1 2024, with many choosing fractional models.

• Platform Growth – Companies like hBits have raised significant funding, reflecting strong investor confidence.

• City Expansion – Gurugram, Mumbai, and Bangalore are emerging as hotbeds for fractional ownership projects.

The Future of Fractional Ownership

• Technology – Blockchain, AI analytics, and asset tokenization are making investments more transparent and liquid.

• Regulatory Evolution – Further SEBI refinements and potential tax reforms could make the model even more attractive.

• Market Projection – Experts predict the sector could reach  ₹4.16 lakh crore by 2030, with growing institutional adoption.

Should You Invest?

Fractional ownership is ideal for:

• HNIs seeking diversification

• NRIs looking for managed Indian real estate exposure

• Young professionals with investable surplus of ₹15+ lakhs

• Conservative investors seeking better returns than FDs

Be comfortable with a 3–7 year lock-in, choose only credible SEBI-regulated platforms, and consult a tax advisor.

Fractional ownership is democratizing real estate investment in India—making premium assets accessible, reducing ownership hassles, and offering solid income potential. While risks exist, informed and careful investors can position themselves to benefit from India’s urban growth story. For those ready to embrace this model, the future looks promising—and potentially very profitable.