Real Estate has seen a rapid increase in prices and for a country with the world's highest and growing population, values will keep rising since the asset class is limited. “Buying a land in Bangalore will cost several crores in some areas, with the rise of fractional ownership, real estate asset classes are becoming accessible to the larger population,” says Avinash Rao, Co-founder, Alt DRX, a fractional real estate platform.
You can invest in property through co-ownership of real estate with like-minded investors, brought together and facilitated by a company following the protocols of fractional ownership. “Fractional ownership in India is done through an entity (Special Purpose Vehicle or SPV) whose core role is to own the real estate and like-minded people,” says Rao.
SM REITs
Small and Medium Real Estate Investment Trusts (SM REITs) SPV is a specially created entity, often a subsidiary company, designed to hold real estate assets on behalf of a Small and Medium Real Estate Investment Trust.
Retail investors can participate in SM REITs by purchasing units that are traded on stock exchanges where these REITs are listed. “The minimum ticket size for investing in SM REITs is set at Rs 10 lakhs, making it accessible for investors who want to diversify their portfolio without significant upfront capital. This lower entry point allows for broader participation in high-quality commercial real estate investments,” says Shiv Parekh, Co-founder & CEO, hBits, a fractional ownership platform.
Returns
Returns from SM-REITs typically include rental income, often yield between 8-10 per cent, and potential capital appreciation of 6 to 7 per cent over three to five years. The exact returns depend on the performance of the underlying properties.
Taxation
“The taxation for SM-REITs returns includes short-term capital gains (for holdings less than one year) taxed at 20 per cent and long-term capital gains (for holdings more than one year) taxed at 12.5 per cent,” says Parekh.
How To Choose The Right Property
To pick the right property with a fractional ownership platform, start by focusing on Grade-A commercial assets. “These properties usually offer higher standards, which attract reliable, premium tenants and help keep rental income steady. It’s best to target areas with strong economies—cities like Mumbai, Bengaluru, and Pune are known for solid rental demand and potential for property values to rise over time,” says Parekh.
Make sure you look closely at the tenant profile. Go for properties with tenants who have a solid financial background. This approach can help reduce the risk of vacancies. It's smart to diversify your investments across multiple cities too, to spread out your risk.
