The article discusses Fractional Ownership in India and the regulatory concerns related to it. Fractional ownership allows multiple shareholders to hold distinct rights in common property. Different special purpose vehicle entities that are formed for fractional ownership may be subject to different laws such as the Companies Act 2013 or the Limited Liability Partnership Act 2008.

It is anticipated that platforms that bring together shareholders into an SPV would fall under the definition of 'real Estate agents' under the Real Estate (Regulation and Development) Act 2016 (RER Act). Shareholders of an SPV could be classified as promoters of a project under the RER Act, depending on the terms of the shareholders' agreement and other factors. The article cites a recent ruling by the Maharashtra Real Estate Regulatory Authority (MahaRERA) on the issue of investors in the real estate sector. The ruling explored the terms of the shareholders' agreement to determine whether the shareholder would qualify as a promoter under the RER Act.

Fractional ownership of real estate has become increasingly popular in India as it provides an opportunity for investors to acquire an interest in commercial, high rent-yielding properties, holiday homes, and major township projects, among others. However, regulatory concerns need to be considered, as there is currently no specific overarching framework regulating fractional real estate ownership in India.

Setting up special purpose vehicles (SPVs) in the form of companies or limited liability partnerships is the current model used to facilitate fractional real estate ownership. Shareholders of the SPV become co-owners and are exposed to the benefits and liabilities encountered by the SPV and its assets.

The applicability of the Real Estate (Regulation and Development) Act 2016 (RER Act) to SPVs, which bring together shareholders, is expected to fall under the definition of “real estate agents” according to section 2(zm) of the RERA Act. Real estate agents are not allowed to facilitate transactions in relation to registered real estate projects or any part of such projects unless they are registered with the Real Estate Regulatory Authority of the state.

In conclusion, while fractional real estate ownership provides an opportunity for investors to acquire an interest in various types of properties, it is crucial to consider the regulatory concerns and legal implications before investing in such ventures.