Fractional real estate platforms have broadened investor access to high-value commercial assets, but experts say the category still demands careful evaluation. With exit markets not fully developed and regulation evolving, retail investors must examine liquidity constraints, realistic returns and alignment of incentives before committing long-term capital.
Liquidity constraints and structural risks stand out
Liquidity remains the biggest challenge across fractional models.
Dhiren Tharwani, Director at Tharwani Realty, says these platforms “can have a high degree of liquidity risk,” particularly because co-ownership exposes investors to vulnerabilities in the commercial property cycle, including debt overhang in certain pockets of the market.
Adding to this, Aksha Kamboj, Executive Chairperson, Aspect Realty, notes that the regulatory framework is still stabilising.
She cautions that limited exit options and the complexity of co-ownership make the structure less liquid than it appears, especially during phases of high leverage in commercial real estate.
From a structural perspective, Manoj Dhanotiya, Founder & CEO of Micro Mitti, highlights risks around valuations and incentives. He points to inflated internal valuations, the lack of a deep secondary market, and “alignment risk” when sponsors themselves have limited capital invested.
Many assets, he observes, are offered at peak valuations because that is when large owners prefer to exit.
Who should and should not consider fractional ownership
The suitability of fractional real estate varies significantly by investor profile.
Tharwani says the model works best for long-term investors looking for rental income and diversification rather than liquidity or short-term gains.
Investors expecting an active secondary market, he notes, may be disappointed.
Kamboj also sees appeal for those seeking passive income and diversified exposure to high-value assets at lower entry costs.
However, investors wanting operational control or quick access to their money may find the structure misaligned with their needs.
Navy Vijay Ramavat, Managing Director, Indira Securities, add that fractional ownership fits investors with moderate- to long-term goals who want exposure to institutional-grade commercial real estate without deploying large capital. Investors with short-term goals or frequent liquidity needs, he says, should avoid it.
Dhanotiya draws a clearer line: the model works best for HNIs comfortable with multi-year lock-ins.
He believes first-time or middle-income investors seeking meaningful wealth creation may find limited upside because “most fractional assets are mature commercial buildings where appreciation is limited.”
Judging whether returns justify lock-ins and low liquidity
Experts advise investors to focus less on headline yields and more on the true risk–return balance.
Tharwani stresses that expected rental yields must be evaluated against the lock-in period and the possibility of sudden market stress. The key assessment, he says, is whether returns compensate for the difficulty of exiting when the broader market weakens.
Kamboj recommends benchmarking projected yields against comparable assets, while scrutinising tenant quality, occupancy history and the conservativeness of cash-flow estimates. The return, she notes, must exceed the trade-off between income stability and limited liquidity.
Ramavat urges investors to verify underlying fundamentals — location, tenant, lease term and platform credibility — before accepting projected returns at face value.
Dhanotiya advises evaluating post-fee IRR, fee structures and the scope for genuine capital appreciation.
He cautions that yield bands of 7-9% may not sufficiently compensate for illiquidity where exits depend on finding a buyer for the SPV.
A growing category, but one that requires discipline
While fractional ownership enhances retail access to commercial real estate, experts across the board emphasise that it is not a plug-and-play investment.
Liquidity constraints, valuation challenges, incentive alignment and regulatory maturation continue to shape the asset class.
For long-term investors comfortable with co-ownership and slower exit cycles, the model may offer diversified income exposure.
For those seeking agility, quick turnover, or higher appreciation potential, it may not yet fit their risk appetite.
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