-Authored By Shiv Parekh, Founder, CEO, hBits
Real estate has long been a favored pathway to wealth in India, yet it has often remained the preserve of those with deep pockets. Today, however, the landscape is shifting dramatically. The latest trend catching the eye of savvy investors is – ‘fractional ownership.’ This approach is transforming the real estate market by making it not just a playground for the wealthy but a viable and profitable option for a much broader audience. Gone are the days when real estate investing required huge capital and cumbersome management responsibilities. Now, with fractional ownership, investors can own a stake in high-value properties at a portion of the cost, unlocking access to premium real estate opportunities that were once beyond reach.
The Fractional Ownership Boom
The last few years have witnessed rapid growth in fractional ownership in India, driven by increased awareness, technological innovation, and a shift in investor behavior towards investing in more flexible and liquid assets. A combined report by CREDAI and JLL measures the future market size of the Indian real estate sector at $1 trillion by 2030. Fractional ownership in this rapidly growing sector is likely to capture a sizeable portion, with projected Assets Under Management (AUM) of touching $5 billion by the same time. The impact that fractional ownership might have on the overall real estate scenario would thus be substantial. It reduces risks by permitting investors to broaden their portfolios across various properties and locations, opening the way for new investment opportunities, and hence contributing to overall real estate market growth.
Investor Benefits
The growing appeal of fractional ownership can be attributed to its numerous financial advantages, making it an attractive option for investors seeking diversification, liquidity, and potential returns.
- Fractional ownership will provide a chance for investors to have a diversified capital portfolio across properties, thereby reducing the risk associated with investment in one asset. Such an approach can result in better diversification of the portfolio and exposure to various real estate markets—residential, commercial, and industrial properties. One can reduce the risks and increase the chances of higher returns if performed through an investment in various assets.
- One of the significant challenges associated with traditional real estate investment is the lack of liquidity. Selling a property may take time and can also be complicated. On the other hand, fractional ownership offers better liquidity, where one can easily sell their shares within no time through specifically designed platforms.
- Fractional ownership in Grade-A assets often provides very impressive returns because investors not only earn rental income but also generate capital appreciation. As an example, it can thus be a very effective strategy to drive retirement planning, diversification of portfolios, and wealth creation. With lower entry points and professional management, reduced issues with property management allow investors to experience steady returns.
Challenges and Opportunities
The fractional ownership market in India shows great promise but faces challenges in reaching its full potential. To address these, transparent valuation mechanisms, regular property performance updates, and a strong secondary market are essential for enhancing liquidity. Regulatory bodies like SEBI is actively working on frameworks to ensure investor protection and market stability, which will build confidence. Additionally, technology-driven platforms are making access and management more efficient, supporting market growth.
Conclusion
The fractional ownership market in India is on the brink of significant growth. With its flexibility, accessibility, and attractive financial benefits, it is set to become a cornerstone of modern investment strategies. As the industry continues to address challenges related to valuation, liquidity, and regulatory risks, and as new trends and opportunities emerge, the potential for growth remains substantial. Investors looking to diversify their portfolios and explore new avenues for wealth accumulation should consider the opportunities presented by fractional ownership in real estate. With its promise of democratizing access to premium real estate and offering a balanced mix of risk and reward, fractional ownership is well-positioned to shape the future of real estate investment in India.
