Real estate fractional ownership market touches Rs 4,000 crore; to grow at 25-30% annually: Report

Fractional ownership of real estate is gradually gaining acceptance among investors as assets under management have touched Rs 4,000 crore, according to a report.

TruBoard Partners, a tech-enabled real asset management company, has come out with a report on fractional ownership.

Many private companies have set up fractional ownership platforms that allow investors to own a fraction of real estate assets.

'Fractional ownership typically involves the ownership of an underlying real estate asset among multiple investors. This lowers capital requirements and facilitates participation of a larger set of players in real estate asset ownership,' the report said.

Investors infuse their fund 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 people to pool in money and jointly own real estate.

'Although the concept of fractional ownership of real estate is at a nascent stage in India, it is expected to grow in the next few years aided by tech-driven platforms,' Sangram Baviskar, MD, Real Estate Practice, TruBoard Partners, said.

The fractional ownership market, which is the total asset under management (AUM) by all these platforms, in India jumped from Rs 1,500 crore in 2019 to Rs 4,000 crore in 2023, it added.

TruBoard Partner has projected a 25-30 per cent compounded annual growth rate (CAGR) in the AUM of the fractional ownership market over the next 4-5 years.

Commenting on the report, Shravan Gupta, Founder and CEO, YOURS, said, 'Fractional ownership of real estate specially in luxury homes is now getting greater interest in India and is growing at a fast pace.' Investors and lifestyle seekers are both getting attracted to this new instrument, he said, adding that this gives an opportunity for more people to participate in this unique asset class.

Stating that fractional ownership of real estate is likely to come under SEBI regulations, Gupta said, 'we are bullish that this new investment tool will gain further traction in the coming years.' Bengaluru-based YOURS runs fractional ownership platform for holiday homes.

Other prominent players include Strataprop, Hbits, Myre Capital Propshare, Yield Asset, Assetmonk Strataprop and PropReturns.

As per the report, the SEBI's proposed regulations aim to bring clarity and integrity to the fractional ownership platforms landscape.

These proposals recommend such platforms to register as Micro Small and Medium (MSM) REITs, with sponsors required to have a minimum net worth of Rs 20 crore, ensuring their active involvement, it said.

SEBI's draft guidelines propose that units of MSM REITs will be mandatorily listed on stock exchanges.

The report highlighted that the Sebi has proposed that the asset size for acquisitions should range between Rs 25 crore and Rs 499 crore. At least 95 per cent of the AUM must be in completed, revenue-generating real estate.