In India the real estate has been discussed as one of the surest means to amass wealth over the decades. The process of property-owning by people has become a sign of financial security and prosperity whether in a residential apartment in a metro city or in commercial spaces in a hub like IT. Nevertheless, very large amounts of capital have always been the greatest hurdle. Luxury commercial projects costing tens of crores Ad to the point, Grade-A office spaces or luxury commercial projects are unaffordable to the vast majority of retail investors.
This is no longer the case following the entry of fractional ownership in India. Investors now only need an investment of 10 – 25 lakh to co-own a premium real estate and receive a passive income akin to rental incomes and capital appreciation. But the question as to whether fractional ownership is an intelligent method of accumulating long-term wealth in India, remains to be answered.
Let’s explore the concept, its benefits, risks, tax implications, and whether it truly deserves a place in your investment portfolio.
What is Fractional Ownership in Real Estate?
Fractional ownership is the system in which several investors form a group with the aim of purchasing and possessing a property. The investors hold the share as percentages which are usually arranged on a Special Purpose Vehicle (SPV) or a Limited Liability Partnership (LLP).
Unlike timeshares, where you only get the right to use a property for a limited time, fractional ownership offers:
- Legal ownership of a property share.
- Income rights proportional to the investment.
- Capital appreciation benefits when the property is sold.
Example:
Assume that a Grade-A office space in Gurgaon will cost 50 crore. This allows 100 investors to chip in 50 lakh instead of an individual to purchase it in a fractional ownership platform. All investors have then been transformed into shareholders of the SPV that owns the property, and sharing in the property income stream (rents) and upside (gain on appreciation).
How Fractional Ownership Works in India
- Property Selection – Fractional ownership platforms identify high-value commercial properties such as office spaces, IT parks, warehouses, or retail outlets.
- Investor Pooling – Multiple investors pool funds to buy the property under an SPV.
- Ownership Structure – Each investor gets proportional shares in the SPV.
- Rental Income – The property is leased to tenants (MNCs, startups, retailers) and rental income is distributed among investors.
- Exit Option – After a lock-in period (typically 5–7 years), the property may be sold, and investors receive capital gains.
Benefits of Fractional Ownership
1. Access to Premium Assets
The usual trend has been that only high-net-worth individuals (HNIs) could afford commercial spaces in metro hubs. Fractional ownership is a way of democratizing real estate whereby retail investors can enjoy Grade-A assets in cities such as Gurgaon, Bengaluru, Hyderabad, Mumbai, and Noida.
2. Passive Rental Income
Commercial fractional property investments have a willingly high potential rental income of 7-10 percent or more in one year, as compared to residential rentals (2-3 percent). This results in an even cash flow that resembles dividend of stocks.
3. Potential for Capital Appreciation
Commercial real estate in a high-growth area appreciates in the long-term. Property equity investment provides a double-income aspect to the investor (rent + gain on the sale) due to the appreciation benefit it generates upon the sale of the property after the holding period.
4. Diversification
Fractional ownership allows investors to diversify across:
- Cities (Gurgaon, Pune, Hyderabad, Bengaluru)
- Property types (office, retail, warehousing, co-living, vacation homes)
- Tenants (MNCs, tech firms, retail brands)
This reduces risk exposure to one asset class.
5. Professional Management
FOPs manage property. They deal with the acquisition of tenants, collection of rents, doing maintenance, complying and reselling. It is easy to invest in as opposed to property ownership and management.
6. Lower Entry Point
With starting investments from ₹10–25 lakh, retail investors get access to institutional-grade assets that were earlier out of reach.
Risks and Challenges of Fractional Ownership
While fractional ownership is promising, investors must consider potential risks:
1. Liquidity Concerns
Fractional ownership is usually associated with a 5-7 year lock in period. Early exit may not be easy since the fractional shares have no secondary market to restart collecting.
2. Regulatory Grey Area
In India the fractional ownership is presently found to come under a regulatory gap EBI is already working out that but in absence of strict directives, there remains the risk of disagreement.
3. Market Risks
The values and rent yield of commercial real estate have a correlation with the rates of demand in the market. There will be a risk that due to economic slowdown reflections in rental income and appreciation will decline.
4. Platform Dependence
It would be most probable that the success of the investment would be determined by the credibility and the management skills of the fractional ownership platform. Ineffective or bogus platform can lead to incitement of finances.
5. Hidden Costs
Some platforms charge management fees, entry loads, or exit fees, which reduce net returns for investors.
Tax Implications of Fractional Ownership in India
Understanding taxation is crucial before investing:
- Rental Income: Taxed under Income from House Property. Investors get a 30% standard deduction but must pay tax as per their slab.
- Capital Gains: Profits from selling shares in the SPV or property are taxed as:
- Short-Term Capital Gains (STCG): If held < 36 months, taxed at slab rates.
- Long-Term Capital Gains (LTCG): If held > 36 months, taxed at 20% with indexation.
- TDS: Tenants deduct TDS before paying rent to the SPV.
- NRIs: Tax deducted at higher rates; however, DTAA (Double Taxation Avoidance Agreement) benefits may apply.
Pro Tip: Consulting a tax advisor ensures you optimize returns and avoid compliance issues.
Fractional Ownership vs Other Investments
| Investment Type | Minimum Investment | Returns | Liquidity | Management | Risk Level |
|---|---|---|---|---|---|
| Fractional Ownership | ₹10–25 lakh | 7–10% rent + capital gains | Low | Professional | Medium |
| Residential Property | ₹50 lakh+ | 2–3% rent + appreciation | Medium | Self-managed | Medium |
| Stocks / REITs | ₹1,000 onwards | Variable | High | Professional | High |
| Fixed Deposits | ₹10,000 onwards | 5–6% | High | Bank-managed | Low |
Fractional ownership offers higher rental yields than residential property and more stability than stocks, but comes with liquidity and regulatory risks.
Who Should Consider Fractional Ownership?
Fractional ownership is ideal for:
- HNIs and Affluent Retail Investors – seeking diversification beyond stocks, gold, or FDs.
- NRIs – looking for secure, income-generating investments in Indian real estate.
- Professionals – with disposable income and long-term wealth-building goals.
- Investors with Medium to High Risk Appetite – since returns are attractive but not guaranteed.
It may not suit investors looking for quick liquidity or guaranteed returns.
The Future of Fractional Ownership in India
The Indian fractional ownership market is still in its early stages but is growing fast. Reports suggest it could reach $5 billion by 2030. Key drivers include:
- SEBI regulation – bringing transparency and investor protection.
- Urbanization & Commercial Demand – as more companies expand, office spaces and warehouses gain value.
- Technology Platforms – simplifying access and enabling smaller investments.
- Shift in Investor Mindset – from traditional assets to diversified, income-generating investments.
City-based filtering is also most likely to be on the rise because the above mentioned cities all have IT centres, multinationals and have established their infrastructure.
So, can you really build wealth with fractional ownership in India?
Yes, but with caution.
Fractional ownership is a solid wealth building strategy, providing access to high-quality property, stable and continuous rental income and reducing the costs of ownership. But, investors should be cautious in evaluating:
- The credibility of platforms
- The location and tenant quality of the property
- Lock-in periods and exit options
- Tax implications
For investors with a long-term horizon and appetite for moderate risk, fractional ownership can be a game-changer in real estate investment.
Looking to explore fractional ownership opportunities in India? Our expert real estate consultants can help you choose the right platform, property, and strategy to maximize your returns. Contact us today for trusted guidance.
