Fractional Real Estate vs REITs: Which is best for Indian investors in 2025?

Most Indians know mutual funds, fixed deposits (FDs), and gold. What’s missing is deeper awareness about real estate investing. The options are evolving fast, and two terms dominate conversations today:

• Fractional Real Estate (Fractional RE)
• Real Estate Investment Trusts (REITs)

Both allow investors to access high-value real estate without needing crores — but they’re fundamentally different. Let’s break down Fractional Real Estate vs REITs for Indian investors in 2025.

What are REITs?

A Real Estate Investment Trust (REIT) works like a mutual fund for real estate. You buy units listed on the stock exchange, and the REIT pools investor capital to purchase and manage commercial assets — offices, malls, or warehouses.

The income generated from rent is distributed as dividends. REITs are:

• Regulated by SEBI — ensuring transparency and governance.
• Listed on exchanges — easy entry and exit for investors.
• Accessible with small investment sizes — sometimes as low as ₹10,000.

What is Fractional Real Estate?

Fractional Real Estate enables investors to directly co-own a premium property through a Special Purpose Vehicle (SPV). You pool funds with other investors to purchase a specific commercial asset and earn rental income in proportion to your shareholding. When the property is sold, you also receive a share of the capital appreciation.

Fractional REs are:

• Legally owned by SPV shareholders — the investors themselves.
• Managed via platforms like PropFTX that handle property vetting, tenant management, and compliance.
• Available with a minimum investment typically between ₹10–25 lakhs (depending on the platform).

What happens when a Fractional RE or REIT property is sold?

In Fractional Real Estate, the property belongs to an SPV. If shareholders decide to sell, the asset is liquidated and proceeds are distributed according to ownership. Investors directly gain from both rental income and capital appreciation.

In REITs, the trust owns the properties — not the investors. When a REIT sells an asset, investors don’t receive a direct share of the proceeds. The REIT manager may reinvest or distribute part of the profit as dividends. Your upside is tied to the unit price on the stock exchange, not directly to the property value.

Which gives higher returns — Fractional Real Estate or REITs?

Fractional Real Estate typically offers:

• Rental yields of 7–9% from Grade-A commercial spaces (3–4% for residential).
• Capital appreciation — housing prices in urban India have risen nearly 79% in five years (~12–13% annually).
• Potential IRR of 7–12%+ depending on tenant quality and location.

REITs in India generally yield 6–8% per year via dividends from pooled rental income. While REIT prices fluctuate with the market, they offer high liquidity and stable returns, though with limited upside compared to Fractional RE.

Should you invest in Fractional Real Estate or REITs?

The right choice depends on your goals:

• Choose REITs if you’re a retail investor starting small, want liquidity, and prefer predictable income.
• Choose Fractional RE if you can commit ₹10–25 lakhs, prefer direct ownership exposure, and seek long-term wealth creation through rent + appreciation.
• Smart investors mix both — REITs for flexibility, Fractional RE for growth.

Comparison Table

The Direct Takeaway

Both Fractional Real Estate and REITs have their unique benefits.

REITs provide easier entry and exit, regulation, and liquidity — ideal for smaller investors. Fractional Real Estate delivers higher returns, control through ownership, and stronger upside over time.

Rather than “Fractional Real Estate vs REITs,” smart investors see them as complementary strategies. Use REITs for short- to medium-term liquidity and redirect profits into Fractional RE for long-term portfolio growth.

Got questions? Visit propftx.com to speak with an expert today.