Fractional Ownership of Holiday Homes in India Will Grow After Sebi's Interposition

Fractional Ownership of Holiday Homes in India Will Grow 

After a proposal by the Securities and Exchange Board of India (Sebi) to regulate all online platforms that allow fractional ownership of real estate assets, experts predict that the concept of fractional ownership of holiday homes, which is still in its infancy in India, would acquire greater support.

Executives in the hospitality sector claim that, whereas fractional ownership of rent-generating commercial properties like offices and warehouses is widespread, the practise has only just begun in the vacation home market.

"Fractional ownership makes real estate investment more popular and open to more people. Shravan Gupta, CEO of Yours, a business that facilitates the joint ownership of high-end vacation properties, has remarked that the industry urgently need regulations and best practises.

The platform intends to provide recommendations to the government, and the proposal papers focus heavily on business properties.

"We want Sebi to include holiday homes, hotels, and resorts also in the list," said Saurabh Vohara, founder of ALYF, a vacation rental company.

"Also, we'd want to see a reassessment of the criterion for rental revenue, because a number of us would be interested in purchasing it for personal use. The overall effect of the rules is to boost confidence in the market and facilitate easier entry.

As more and more people choose to buy second homes, fractional ownership of vacation properties like condos and villas has become more popular.

Companies offering fractional ownership have responded to the increasing demand for vacation homes caused by the Covid-19 outbreak by helping customers acquire high-end properties for a fraction of the price of buying one outright.

Like REITs (real estate investment trusts), the new legislation would benefit the vacation rental market. Mohit Gupta, co-founder of Equity Address, argues that this will encourage people to consider buying a property with a partner.

The business intends to investigate a variety of real estate opportunities for second homes in the range of INR 2 crore to INR 8 crore, with initial investments beginning at INR 20 lakh per investor to suit the needs of those who want to acquire a second house in this price range. Sebi suggested in a discussion paper that such exchanges join the MSM REITs framework for registration. It said that each should have its own set of trustees, sponsors, and investment managers. Debt financing for these schemes is prohibited.

The sponsor and investment manager are required to have a net worth of INR 20 crore and INR 10 crore, respectively, according to the Sebi report. According to the plan, each unit subscribed to under the MSM REIT scheme must be at least INR 10 Lakhs.

A list of fractional property ownership

startup companies in India currently:

• RealX
• Myre Capital
• Assetmonk
• hBits
• Strata
• Definite
• Frxnl
• Fracsn
• BRIKitt
• PropertyShare

These companies enable investors to purchase fractional ownership of properties, typically in the commercial or residential real estate sectors.

Investors can gain exposure to the real estate market without purchasing an entire property.