Sunday, July 14, 2024

Fractional ownership market in real estate surges to ₹4,000 crore.

ruBoard 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.

The market for fractional ownership in real estate is on the rise, with assets under management reaching ₹4,000 crore, according to a report by TruBoard Partners, a technology-driven real asset management firm. Many private companies have established platforms for fractional ownership, allowing investors to own a portion of real estate assets.

Fractional ownership typically involves multiple investors sharing ownership of a real estate asset, which reduces capital requirements and enables a broader range of participants in real estate ownership. Investors invest their funds in securities issued by a Special Purpose Vehicle (SPV) created by the fractional ownership platform. These platforms provide a formal mechanism for a group of individuals to pool their money and collectively own real estate.

While fractional ownership of real estate is still in its early stages in India, it is poised for substantial growth in the coming years, thanks to technology-driven platforms,” stated Sangram Baviskar, Managing Director of Real Estate Practice at TruBoard Partners. According to the report, the fractional ownership market in India, as measured by the total assets under management (AUM) across these platforms, has increased from ₹1,500 crore in 2019 to ₹4,000 crore in 2023.

TruBoard Partners has forecasted a compound annual growth rate (CAGR) of 25-30% in the AUM of the fractional ownership market over the next 4-5 years.

In response to the report, Shravan Gupta, the Founder and CEO of YOURS, remarked, “Fractional ownership of real estate, especially in luxury homes, is gaining significant traction in India and experiencing rapid growth.” He noted that both investors and individuals seeking a particular lifestyle are showing increased interest in this innovative investment option. According to Gupta, fractional ownership provides an opportunity for a broader range of people to engage in this distinctive asset class.

Shravan Gupta also noted that fractional ownership of real estate is likely to come under SEBI (Securities and Exchange Board of India) regulations and expressed optimism that this emerging investment tool will continue to gain momentum in the years ahead. YOURS, a Bengaluru-based company, operates a fractional ownership platform for holiday homes, and there are other prominent players in the market such as Strataprop, Hbits, Myre Capital, Propshare, Yield Asset, Assetmonk, and PropReturns.

According to the report, SEBI’s proposed regulations aim to provide clarity and ensure integrity in the landscape of fractional ownership platforms. These proposals suggest that such platforms should register as Micro Small and Medium (MSM) Real Estate Investment Trusts (REITs), with sponsors required to have a minimum net worth of Rs 20 crore, ensuring their active involvement. SEBI’s draft guidelines also propose that units of MSM REITs must be listed on stock exchanges. Additionally, the report highlighted that SEBI has recommended an asset size for acquisitions ranging between Rs 25 crore and Rs 499 crore, with at least 95% of the Asset Under Management (AUM) to be invested in completed, revenue-generating real estate.

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