Fractional ownership operates through Fractional Ownership Platforms (FOPs), allowing investors to collaboratively purchase real estate assets. For instance, ten investors each contributing Rs 10 lakh can collectively acquire a Rs 1 crore residential property. Management of the property is overseen by FOPs, and rental profits are equitably distributed among investors based on their contribution.

Investors benefit from FOPs offering perks like complimentary stays at the property annually. Some specialize in second homes at vacation spots, while others focus on fractional ownership of commercial properties for leasing. Platforms such as ALYF enable investments as low as Rs 10 lakh, broadening access to a wider array of investors.

SEBI’s proposed regulations intend to bring uniformity and clarity to the fractional ownership market. The framework suggests FOPs should register under the Micro, Small, and Medium Real Estate Investment Trusts structure, having separate trustees, sponsors, and investment managers. SEBI identifies potential risks stemming from a lack of consistent selling practices and independent valuation.

While fractional ownership presents diversification and access to high-value properties, critics argue that conventional exclusive ownership remains preferable. Real estate consultant Sunil Gehi advises caution regarding the challenges of being a co-owner, especially when exiting the arrangement. He also notes limitations in securing home loans for such properties.

Moreover, experts advocate for perceiving fractional ownership as a long-term investment strategy rather than a route to quick gains. Sudarshan Lodha, co-founder, and CEO of Strata, a fractional ownership platform, recommends a goal-oriented approach and thorough evaluation before entering this realm.

As fractional ownership’s popularity surges in India, achieving a balance between safeguarding investors and facilitating opportunities for small investors in real estate becomes paramount.