Can Fractional Ownership In Real Estate Be a Wealth Creator for Retail Investors?

Along with diversification, the smaller ticket sizes of a premium investment class make it attractive for retail investors

- S SHANTHI

A mainstream asset class in Western economies, 'fractional investment' or partial ownership in large properties, is today finding more takers in India as well. Though a fairly new trend, the asset class has already shown significant growth in the last few years. The market size of fractional ownership in India was $ 5.4 billion in 2020 and is projected to reach $8.9 billion by 2025, growing at a CAGR of 10.5%, says a report by Knight Frank.

The segment has seen the entry of many startups that are leveraging technology to find the right product-market fit and create effective business models in the space. Some of the active players in India include Hbits, Strata, Asset Monk, Property Share, ALYF, AURUM WISE X, among a few others. The prominent names in the US and UK include Roofstock, CrowdStreet, RealtyMogul, LexMarkets and London Fractions, British Pearl respectively.

RISE OF FRACTIONAL OWNERSHIP: THE KEY DRIVERS

It is exciting for retail investors to gain "ownership" of premium properties that are well beyond their budget and it helps in the diversification of their investment, say experts from the sector and VCs closely watching it. Further, the small ticket sizes allow retail investors to take a bet on a small sum, thereby reducing the risk. This explains the heightened interest among retail investors. "It provides diversification and the smaller ticket sizes make it attractive for retail investors. Separately, platforms that enable this investment take care of the diligence and other formalities, making it easy for the end investor," says Ratna Mehta, an ex-Everstone executive director and an experienced VC investor.