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REM TIMES takes a look at the growing market of fractional ownership, which has been catching the fancy of real estate investors
April 30, 2024 | Deepa Natarajan Lobo | UAE | Developers
For investors looking to own a high-value property without having to dwell too much on the maintenance, legalities or finances of it that accompany along, fractional or co-ownership is the ideal solution. Although still in its initial phase in Dubai and the surrounding regions, the concept of shared or fractional ownership of properties has been catching the attention of global investors.
A system where a property is jointly owned by several investors, fractional ownership consists of a single property split into quarters, with each part owned by a different individual and having its own deed, that can be sold or mortgaged independently.
“Unlike a timeshare, where investors buy time in a property, fractional ownership involves owning a part of the actual real estate. This is particularly aimed at smaller investors in the hotel-apartment sector, enabling them to own a portion of property for less capital,” explains Ahmad Al-Khalil, a Dubai-based legal expert.
A rising trend in the real estate landscape, co-ownership is even witnessing the onset of several firms that offer trusted deals to investors. Shard, launched in 2024, is one such organisation that offers fractional ownership deals for prime properties with seamless end-to-end management and legal ownership, at a fraction of the cost. “Co-ownership with Shard is not a timeshare; it's a modern and sustainable way to co-own prime property with up to eight owners. When you purchase a 1/8 share of a property, you truly own that fraction: your name is on the title deed, giving you the freedom to spend your holiday there, or rent it out through Shard,” reveals Istvan Juhász Co-Founder and CEO of Shard.
“For the price of one property, you are able to buy eight and diversify your portfolio. Shard uses its own algorithm to select the 1% of prime property worth buying. This ensures that buyers benefit from strong price appreciation as well as the highest rental yields for a combined ROI of approximately 10% annually. With a starting price of 200,000 AED, Shard makes second home ownership more accessible,” he adds.
Like any new phenomenon in its pilot phase, fractional ownership too comes with its share of challenges such as disputes between co-owners or with property managers, necessitating tailored management agreements to handle potential conflicts and operational issues. “While fractional ownership reduces the financial barrier to real estate investment, prospective buyers must consider complex ownership dynamics and management company roles before investing,” advises Al-Khalil.
“While fractional ownership reduces the financial barrier to real estate investment, prospective buyers must consider complex ownership dynamics and management company roles before investing.”
Ahmad Al-Khalil, Dubai-based Legal Expert
Madhav Dhar, COO of Founding Member, ZāZEN Properties, a prominent real estate developer in the emirate, advises fractional owners to sign an agreement clarifying each party’s rights. “Co-ownership does come with inherent risks and disagreements; therefore, it is advisable for co-owners to also enter into a separate joint ownership agreement to lay out each party’s rights and responsibilities and avoid future disputes,” he points out.
Since it is affordable especially for young and first-time buyers, the segment will definitely gain traction in the coming months, according to Dhar. “We will start to see an increase in co-ownership models catering to specific demographics, like young couples or working professionals seeking shared living arrangements. And this will further be bifurcated into the ‘high-end’ and 'mid-market’ price segments as the segment matures. With a growing middle-class population, it will be increasingly visible to international investors and expats who are attempting to diversify their income and produce wealth,” he states.
Globally too, fractional ownership is on the rise, especially in the hotel and serviced apartments segment. “It is being seen as an attractive alternative to timeshares and home-sharing platforms, offering potential income from property value increa
