🧮 What is Fractional Real Estate Investment?
Fractional real estate investment is a revolutionary way to invest in premium commercial and residential properties without buying the entire property. Through fractional ownership platforms, multiple investors pool their money to purchase high-value real estate, each owning a proportional share of the property.
Our Fractional Real Estate Calculator helps you estimate potential returns from such investments, including rental income, capital appreciation, and the impact of platform fees. Whether you are considering platforms like Strata, PropertyShare, hBits, or RealX, this calculator provides clarity on expected returns.
💰 How Does Fractional Real Estate Work?
When you invest through a fractional ownership platform, here is what happens:
- Property Selection: Platforms identify premium commercial properties (office buildings, warehouses, retail spaces) with stable tenants
- Fractional Units: The property is divided into fractional units, typically starting from ₹10-25 lakhs per unit
- Ownership: You own a percentage of the property based on your investment amount
- Rental Income: You receive monthly or quarterly rental income proportional to your ownership
- Capital Appreciation: When the property is sold (typically after 3-5 years), you receive your share of the appreciation
💡 Understanding Your Returns
Fractional real estate returns come from two sources:
- Rental Yield (3-8% p.a.): Regular income from tenant rent payments. Commercial properties typically offer 4-6% rental yields, while residential yields are lower at 2-3%.
- Capital Appreciation (5-12% p.a.): Property value growth over time. Prime commercial properties in tier-1 cities have historically appreciated 8-12% annually.
Total Returns = Rental Yield + Capital Appreciation
For example, a property with 4% rental yield and 8% appreciation delivers approximately 12% total annual returns.
💡 Types of Fractional Real Estate Properties
Fractional ownership platforms typically offer these property types:
- Grade A Commercial Offices: IT parks, business centers with MNC tenants. Rental yield: 4-6%, Appreciation: 8-10%
- Warehouses & Logistics: E-commerce fulfillment centers, cold storage. Rental yield: 5-8%, Appreciation: 10-15%
- Retail Spaces: Shopping centers, high-street retail. Rental yield: 3-5%, Appreciation: 6-8%
- Data Centers: Growing demand from tech companies. Rental yield: 6-8%, Appreciation: 12-15%
- Student Housing: Near universities and colleges. Rental yield: 4-6%, Appreciation: 5-7%
✨ Benefits of Fractional Real Estate
- Low Entry Barrier: Invest in premium properties with just ₹10-25 lakhs instead of ₹10+ crores
- Diversification: Spread investments across multiple properties and cities
- Professional Management: Properties are managed by experienced asset managers
- Regular Income: Receive rental income monthly or quarterly
- Transparency: Online dashboards show property performance, tenant details, and rent collection
- Quality Tenants: Properties typically have blue-chip corporate tenants with long-term leases
⚠️ Risks to Consider
- Illiquidity: Unlike stocks, you cannot sell your fraction instantly. Exit typically happens when the property is sold (3-5 years) or through secondary markets
- Market Risk: Property values can decline due to economic conditions, location factors, or oversupply
- Tenant Risk: If major tenants vacate, rental income drops until replacement
- Platform Risk: The platform managing your investment may face operational issues
- Regulatory Risk: Fractional ownership regulations are still evolving in India
💡 How to Choose a Fractional Real Estate Platform
When selecting a platform for fractional property investment, evaluate these factors:
- Track Record: Check the platform past property exits, actual returns delivered, and years of operation
- Property Quality: Look for Grade A properties in prime locations with reputable tenants
- Fee Structure: Understand all fees - entry fee (1-2%), management fee (0.5-1% annually), and exit fee
- SEBI Registration: Some platforms are registered as SM REITs (Small and Medium REITs) providing regulatory oversight
- Secondary Market: Check if the platform offers a secondary market for early exits
- Transparency: Regular updates on property performance, tenant health, and financial statements
💡 Fractional Real Estate vs Other Investments
| Investment Type | Min Investment | Expected Returns | Liquidity |
|---|---|---|---|
| Fractional Real Estate | ₹10-25 Lakhs | 10-14% p.a. | Low (3-5 years) |
| REITs | ₹300-500 | 8-12% p.a. | High (daily trading) |
| Direct Property | ₹50L - 10Cr+ | 8-15% p.a. | Very Low |
| Equity Mutual Funds | ₹500 | 10-15% p.a. | High (T+2 days) |
💡 Popular Fractional Real Estate Platforms in India
- Strata: One of the pioneers, focuses on Grade A commercial properties. Minimum investment: ₹25 lakhs
- PropertyShare: Offers commercial and warehousing properties. Minimum: ₹10 lakhs
- hBits: Technology-driven platform with diverse property portfolio. Minimum: ₹25 lakhs
- RealX: Blockchain-based fractional ownership. Minimum: ₹50,000
- MYRE Capital: Focuses on pre-leased commercial assets. Minimum: ₹25 lakhs
💡 Tax Implications
Understanding tax treatment of fractional real estate returns:
- Rental Income: Taxed as per your income tax slab. You can claim standard deduction of 30% on rental income
- Capital Gains: If held for more than 24 months, Long-Term Capital Gains (LTCG) tax of 20% with indexation applies. For shorter periods, Short-Term Capital Gains (STCG) as per your tax slab
- TDS: Platforms may deduct TDS on rental payments which can be claimed while filing returns
❓ Frequently Asked Questions
What is the minimum investment for fractional real estate in India?
Most platforms require a minimum investment of ₹10-25 lakhs. However, some newer platforms like RealX offer entry points as low as ₹50,000 using blockchain technology. The higher minimums ensure meaningful ownership stakes and reduce administrative costs.
How is fractional real estate different from REITs?
REITs are traded on stock exchanges with daily liquidity and lower minimum investments (₹300-500). Fractional ownership gives you direct ownership in specific properties you choose, potentially higher returns, but lower liquidity (3-5 year lock-in). REITs own diversified portfolios, while fractional lets you pick individual properties.
What returns can I expect from fractional real estate?
Typical returns range from 10-14% annually, combining 3-6% rental yield and 6-10% capital appreciation. Commercial properties in metro cities have historically delivered these returns. However, returns are not guaranteed and depend on property performance, tenant stability, and market conditions.
Is fractional real estate safe? What are the risks?
Key risks include illiquidity (cannot exit easily before property sale), market risk (property values can decline), tenant vacancy risk, and platform operational risk. To mitigate risks, choose SEBI-registered platforms, diversify across properties, and invest only surplus funds you will not need for 5+ years.
How often do I receive rental income?
Most platforms distribute rental income monthly or quarterly, directly to your bank account. The rental yield is typically 3-6% annually for commercial properties. Some platforms reinvest small amounts to cover maintenance, distributing net rental to investors.
What happens when the property is sold?
Platforms typically hold properties for 3-5 years before selling. Upon sale, investors receive their proportional share of the sale proceeds plus any accumulated capital appreciation. Most platforms target 15-20% IRR over the holding period including rental and appreciation.
Can I sell my fractional ownership before the property exit?
Some platforms offer secondary markets where you can sell your fraction to other investors before the property sale. However, liquidity in secondary markets is limited, and you may need to sell at a discount. Exit options vary by platform, so check this before investing.
How are fractional real estate investments taxed?
Rental income is taxed as per your income tax slab (30% standard deduction available). Capital gains: if held for more than 24 months, LTCG tax of 20% with indexation benefit applies. For shorter periods, STCG is taxed at your slab rate. Consult a tax advisor for your specific situation.