The real estate industry in Kenya is changing quickly. Innovation has become the new norm in everything from off-plan buildings to serviced apartments and short-term rentals. However, one idea that is only now beginning to gain traction has the potential to permanently alter the rules of the game: fractional ownership.
Fractional ownership: What is it?
When several people band together to jointly own a high-value asset, such as a business property, vacation home, or opulent apartment, this is known as fractional ownership. Each owner has proportionate rights to the property, whether for use or investment returns, and they each own a percentage (or "fraction") of the title.
Many middle-class and first-time investors are finding it more and more difficult to afford Kenya's escalating real estate costs, particularly in upscale neighborhoods like Kileleshwa, Lavington, Westlands, and Kilimani. Diversified real estate portfolios are becoming more and more popular at the same time.
Fractional ownership is therefore a rapid fix.
It makes entry into the market less expensive, particularly for young professionals or investors from the diaspora who wish to participate in high-yield real estate assets. It was previously only available to ultra-high net worth individuals; however investors can now purchase branded homes, serviced apartments, or vacation homes in upscale areas without having to deal with full-time property administration; the property is frequently managed by professional companies on behalf of all co-owners.
Although the concept is still in its infancy in Kenya, we have a solid framework thanks to international precedents:
A special purpose vehicle (SPV) or management business purchases a property.
Investors purchase ownership shares, which typically include four to twelve owners per property.
If it's a luxury property or vacation home, usage schedules are made.
If the property generates income, owners receive a portion of the rental income according to their ownership stake.
There are built-in exit options, usually with buyback guarantees or resale platforms after a predetermined amount of time.
