Fractional investing is an investment strategy where an investor—let’s say you—purchases a share of an asset thereby taking fractional ownership of the asset along with any potential income generated from it.
Now, your Google search obviously indicated that you want to know in-depth about it, and in-depth we will in this article.
Let’s start with a user journey:
Say you woke up one day and decided that enough was enough! After all, how long would you just keep yourself limited to investing in FDs, Corporate bonds, or even mutual funds for that matter? It’s time to play big, right?
Playing in the big leagues, in investment terms, generally refers to high-value assets such as commercial real estate, stock market, and private equities. These are highly rewarding options. Investing in the stock market after careful analysis and market research can generate returns beyond limits.
As for real estate, there’s mostly always an upward trajectory with capital appreciation and rental income.
Since they’re high-value assets, there’s also a higher entry barrier for the capital required for investment. While the average minimum capital required to invest in residential property ranges anywhere between ₹50–70 lakh, investing in commercial real estate is typically beyond reach for a retail investor, generally valued at ₹25–30 crores. (Source: The Financial Express)
So, is there no way we can invest in these high-value assets and diversify our portfolio to take a shot at higher returns?
And that’s where fractional investment — also known as fractional ownership — comes into play.
In the ever-evolving investment domain, fractionalization has emerged as a game changer, especially in real estate. This new investment approach opens up access to markets previously only available to the wealthy, opening the way to a wider audience.
Read on to understand everything about fractional investment before you consider and approach this revolutionary investment strategy with confidence.
Fractional investing enables investors to buy a portion, or “fraction,” of a high-value asset, such as commercial real estate or an apartment, to reduce the need for capital expenses.
Let’s take one more analogy, shall we?
Imagine you and a group of friends spot a beautiful artwork valued substantially more than any of you could afford individually. However, by pooling your resources, each of you can own a part of this artwork. This is the essence of fractional investing: collective ownership that allows for shared benefits and risks.
Fractional ownership refers to sharing ownership of the asset with other investors. Think of it as a pie divided into several slices, each representing a share of the asset.
Fractionally investing in real estate involves purchasing a share of a property’s equity. This share grants rights proportional (pro-rata) to your investment size, including potential income from rent and appreciation in property value.
It’s facilitated by platforms that divide property rights into smaller, purchasable units — or tokens — making real estate investment accessible without buying an entire property outright.
The platforms allow you to choose an investment property from a curated list. Once you decide on one, you invest a fraction of the property’s value. As the property generates rental income or appreciates, your share value increases.
Let’s take a simplified case study to understand all the terms you need to know.
The Scenario:
A group of investors aims to buy Pine Tree Plaza, a $10 million commercial space with shops and offices. The high price makes it tough for one person to buy, so they opt for a shared approach to make it easier for everyone.
Sharing Ownership
Each investor buys a piece of the plaza. If someone puts in $1 million, they own 10% of it. This share grows if the plaza’s value goes up or earns more rent, giving them a slice of the profits.
Making It Easier to Sell
Suppose one investor wants to exit and convert their share into cash. The ease with which they can do that reflects liquidity. Tokenization drastically improves liquidity compared to traditional real estate.
Simplifying with Digital Tokens
Verified platforms such as PropFTX create digital tokens that represent small shares of a property, allowing investment with even smaller amounts. These tokens can be traded online like stocks.
Equity: The value of an investor’s stake in an asset.
If you own 10% of a ₹50 lakh asset → you get ₹5 lakh when selling.
Liquidity: How easily you can buy or sell an asset.
Tokenization: Converting asset rights into digital tokens on a blockchain.
| Feature | Fractional Investment | REIT | Direct Ownership |
|---|---|---|---|
| Ownership | Partial in specific properties | Shares in a company owning multiple properties | Full ownership of a single property |
| Investment Size | Small, flexible | Varies with share price | High — entire property value |
| Control | Limited | None | Complete |
| Income & Returns | Depends on property performance | Dividends | Rental income + appreciation |
Fractional Ownership vs REIT vs Direct Ownership
Better Accessibility: Low entry barrier makes real estate open to all.
Portfolio Diversification: Invest across multiple properties easily.
Professional Management: Experts handle the property.
Transaction Efficiency: Blockchain enables instant, transparent transactions without paperwork.
Research: Check platform credibility, property details, and investment terms.
Risk Tolerance: Assess market movement and long-term alignment.
Legal & Tax Implications: Understand regulations and taxes.
Whether you're an experienced investor or a newcomer, fractional investing offers a viable path to diversify your portfolio and access high-value assets.
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Let’s start transforming aspirations into tangible assets — Cheers!
