By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News (TREN)
Thane – MMR | October 2025
What Exactly Is Fractional Ownership
Fractional ownership allows multiple investors to collectively own a single property.
Historically, Indian investors used SPVs (Special Purpose Vehicles) — private limited companies created solely to hold an asset — with each investor owning shares in that company.
This structure is lawful only if the SPV remains private: it cannot publicly invite investors and must have no more than 200 shareholders, as laid out in Section 2(68) of the Companies Act, 2013.
In March 2024, the Securities and Exchange Board of India (SEBI) introduced Small & Medium REITs (SM-REITs), bringing all publicly offered fractional ownership models under a regulated structure for the first time.
How SM-REITs Work (Today)
- Scheme Size: ₹50 – ₹500 crore
- Minimum Investors: 200 or more per scheme
- Minimum Investment: ₹10 lakh per investor
- Asset Type: At least 95 % of each scheme’s value must be in completed, rent-yielding properties (no construction risk)
- SPV Definition: A wholly owned subsidiary formed to hold the underlying asset
- Listing & Liquidity: Units are listed on stock exchanges; liquidity depends on market depth, which is still developing
What Is Not Allowed
Any public pooling of money for real estate outside the SM-REIT framework is non-compliant.
Private SPVs may exist for closed groups but cannot advertise publicly or exceed 200 members.
A platform marketing “fractional investments” without SEBI registration is operating outside the law.
Why Investors Are Interested
Fractional ownership opens access to Grade-A commercial assets once reserved for institutions.
With entries around ₹10 lakh, investors can earn rental income from professionally managed, leased properties.
Current market yields average 7 – 8 % (net), while total returns depend on tenant quality and exit timing — indicative, not assured.
The Real Risks
- Liquidity Limits: “Listed” does not mean liquid; secondary-market depth is still thin.
- Governance Risk: In mid-2025, a registered platform surrendered its SM-REIT licence after management disputes — proof that oversight cannot replace competence.
- Legacy SPVs: Raising public money through private entities breaches SEBI and Companies Act rules.
- Market Cycles: Occupancy and lease quality affect returns far more than marketing material.
Expert Insight
Fractional ownership is a smart way to diversify, not a shortcut to wealth.
- Prefer SEBI-registered SM-REITs for public exposure.
- Limit your allocation to 10 – 15 % of your property portfolio.
- Examine the lease, not the brochure: tenant strength, lock-in period, and WALE matter most.
- Plan exits realistically: listing adds options but not instant liquidity.
- If using a private SPV, ensure it has no more than 200 members and a clear shareholders’ agreement.
Real estate rewards discipline, not hype. Technology makes entry easier, but due diligence still decides outcomes.
About the Author
Arosh John is the Founder of John Real Estate (MahaRERA Reg. No. A51700001835) and Editor-in-Chief of Thane Real Estate News (TREN). With over a decade of expertise across Thane and the Mumbai Metropolitan Region, he specialises in primary, resale, and villa transactions with a focus on legal clarity and investment advisory integrity.
Disclaimer
This publication is for educational purposes only and does not constitute investment or legal advice. Readers should verify facts through official sources (SEBI regulations and FAQs, MahaRERA portal, Companies Act records) and seek independent professional guidance before making investment decisions. All brands and trademarks mentioned belong to their respective owners.
