Fractional real estate is a type of investment structure that allows multiple individuals or entities to share ownership in a property. It involves dividing ownership of a real estate property into smaller, more affordable fractional units, with each unit representing a percentage of ownership in the property. Fractional ownership can also be used for vacation homes or other types of high-end properties, where owners can purchase a portion of the property and have access to it for a certain period.
Since fractional investing is a relatively new real estate investment mode, there are only a handful of companies offering this investment opportunity. Generally, the valuation is based on the fair market value of the property under consideration. The companies offering this investment opportunity are involved in the valuation process before they offer investors the opportunity to invest.
In a simple way, if a property is worth ₹1,00,00,000 and 10 investors invest ₹10,00,000 each, each investor owns 10% of the property. Each investor is entitled to 10% of the rental income that the property generates.
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