The fractional ownership segment in India is gradually gathering pace. The segment, marked on concrete profitability and tangible gains, is expected to grow at a staggering speed in the times to come.
The fractional AUM model is already established in markets such as Singapore, US, Canada Germany, UK & Australia. The global market of fractional real estate is already large. It was sized at USD 5.4 billion in 2020 as per research by Knight & Frank. By 2025, the market is set to reach USD 8.9 billion, growing at a CAGR of 10.5%
In India as well, it can generate billions of dollars in annual revenue. Presently the market is sized at INR 4000 crores and has grown significantly in the past 4 years when it was sized at less than 1500 crores. However, it is just the tip of the iceberg as the overall potential is much vast. In the Grade-A office assets itself, there is an untapped market of close to INR 550,000 Crores (Over USD 75 billion) that can be traded under the umbrella of fractional projects.
SEBI has recently shown interest in regulating the space, which will further bring transparency and offer an institutional framework for fractional real estate advisories to operate effectively.
With the help of fractional, which works like a pooled investment, one can invest even with limited bandwidth.
There are numerous inherent benefits associated with fractional ownership that can make it the go-to asset to make high returns with minimal downside risk. Right from access to high-value Assets, lower entry barrier, liquidity, and diversification, the benefits are many.
While increased yield will be a key enabler, investors will also be drawn by right-priced assets with long-term growth potential.With the recent SEBI update, now bigger players in the market are mulling over the category and planning to make a full-fledged entry. A similar trajectory was experienced in the Mutual Fund, Equity trading, Wealth Management, and Insurance business in the past.
Under normal circumstances, someone with an investment capacity of INR 5-10 lacs can’t invest in high profit-generating assets such as grade-A offices, warehouses, industrial plots, and serviced apartments due to larger acquisition costs. However, with fractional ownership, one can make investments and make commendable profits, as it pools investment from multiple sources.
Unprecedented digitization Will Fuel The Segment
Fractional ownership has tremendous potential to further democratize & organize Indian real estate and make it a more level-playing space. The upswing will also be pushed forward by the growing adoption of technology and digitization. Recent inroads of technology in Indian real estate have also helped create a bunch of new-age fractional platforms that offer multiple property investment options under one umbrella. These platforms are further backed by robust analytics, data algorithms, and advanced user interfaces to offer a seamless & transparent buying experience to discerning investors.
Technology and analytics are helping in creating an overall ecosystem for the growth of the fractional real estate investment market in India. It is bridging the gap between Proptech and Fintech by enabling investment in real estate, just like financial instruments. Going forward, technology will play a pivotal role in shaping the segment.
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