In today’s rapidly evolving real estate landscape, innovative approaches such as fractional ownership are reshaping how investors engage with commercial properties. This concept enables multiple investors to own fractions of high-value assets, democratising access to the lucrative commercial real estate market. In this State of the Economy podcast, businessline’s Abhishek Law speaks to Sudarshan Lodha, Co-founder &CEO, Strata, about the relevance of fractional ownership. 

Lodha states that fractional ownership parallels the stock market, where individuals purchase shares of a company. Similarly, investors can now acquire shares in commercial properties, becoming fractional owners of a building. This model provides an avenue for retail investors to participate in high-value, rent-yielding real estate, traditionally accessible only to wealthy individuals or large corporations. By enabling shared ownership of premium commercial assets, platforms like Strata have effectively created an “IPO for buildings,” fostering greater inclusivity and liquidity in the real estate sector. 

According to Lodha, Strata offers a flexible investment platform, accommodating individual investors, partnerships, trusts, and NRIs. The platform will also soon facilitate dollar investments from foreign investors. Upon investing, individuals receive share certificates representing their ownership stake in the property. The model promises an average annual return of 13 to 16 per cent, comprising 8 to 9 per cent rental income and additional capital appreciation realised upon selling the property. Strata advocates a long-term investment perspective, emphasising the compounding benefits akin to traditional real estate investments, where properties appreciate significantly over time. 

While both fractional ownership and Real Estate Investment Trusts (REITs) offer exposure to real estate assets, they differ in structure and scope. Fractional ownership typically focuses on single properties, providing investors with concentrated exposure to specific assets or micro-markets. Conversely, REITs aggregate multiple properties, offering a diversified portfolio across various locations. As the fractional ownership market matures, it is increasingly being recognized under the Small and Medium REIT (SM-REIT) framework, offering property-specific listings that promise potentially higher returns compared to larger, more diversified REITs. 

The fractional ownership market in India has witnessed remarkable growth since its inception in 2020. With Strata alone managing assets worth over 2,000 crores, the overall market is estimated to be around 4,000-4,500 crores. This rapid expansion underscores the model’s appeal, especially among affluent investors seeking to diversify their portfolios. As regulatory frameworks evolve and platforms streamline operations, fractional ownership is poised to capture a significant share of the real estate investment landscape, particularly among retail investors and NRIs who seek hassle-free asset management. 

The typical fractional ownership investor profile comprises professionals, family offices, and high-net-worth individuals. Interestingly, a substantial portion of investors are NRIs, drawn by the prospects of owning income-generating assets in India’s thriving commercial real estate market. With the minimum investment threshold poised to decrease, the model’s accessibility is set to broaden, attracting a wider investor base. Strata’s approach resonates with individuals seeking a more liquid, transparent, and informed investment process, enabling them to selectively invest in properties that align with their financial goals and risk appetite. 

Listen in to the podcast to know more. 

(Host: Abhishek Law, Producers: Anjana PV, Siddharth Mathew Cherian) 

About the State of the Economy podcast  

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups 

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