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 by TruBoard Partners.
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.
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. 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.
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.
