Fractional Ownership Emerges as a New Realty Investment Trend for Second Homes

Planning to buy a second home in a coastal destination like Goa but hesitant to invest a large amount in a single property? Fractional ownership may be the right solution. For those aspiring to own luxury second homes in holiday destinations, fractional ownership offers an attractive alternative, combining lifestyle benefits with potential returns, without requiring substantial upfront investment.

What is Fractional Ownership?
Fractional ownership refers to shared ownership of a high-value real estate asset, such as a luxury holiday villa or a floor in a commercial building. The cost of the property is divided among multiple buyers, making them co-owners. Typically structured through a Special Purpose Vehicle (SPV), each investor is entitled to a proportional share of rental income and sale proceeds. Investors can also enjoy limited personal use of the property annually, along with potential capital appreciation of 8% or more.

Challenges of Full Ownership:
Owning a second home outright in a holiday destination comes with challenges such as property management, maintenance expenses and time commitment. Managing rentals, hiring staff and overseeing operations can be cumbersome. Fractional ownership eliminates these hassles, as professional teams handle operations and maintenance, while costs are shared among co-owners. Investors can use the property occasionally for personal or family stays without the pressure of year-round rentals, creating a balance between lifestyle and returns.

Though not entirely new—earlier seen in resort-style timeshare models—fractional ownership has evolved significantly. In 2024, SEBI amended REIT regulations, introducing small and medium REITs, bringing fractional ownership platforms under a regulatory framework and enhancing investor confidence.