Rahul Sharma, CFA
Head of Investment Research, ZenithAbode
Build a ₹10 Lakh Fractional Real Estate Portfolio
Complete investment strategy for first-time fractional investors. Covers allocation framework, property selection, risk management, and rebalancing - optimized for 18-20% IRR target with downside protection.
Recommended Portfolio Allocation
₹10 Lakh Portfolio Breakdown:
- ₹4.5L (45%): Grade-A Commercial Office (Mumbai/Bengaluru)
- ₹2.5L (25%): Co-working / Flexible Office Space
- ₹2L (20%): Managed Residential (Student Housing/Premium Apartments)
- ₹1L (10%): REITs / Liquid Reserve for Opportunities
Expected Blended IRR: 18.7%
Risk Level: Moderate
Rebalancing: Annual
Property Selection Criteria
Grade-A Commercial Office (₹4.5 Lakh Allocation):
- Location: BKC Mumbai, Whitefield Bengaluru, Cyber City Gurugram
- Tenant Quality: Investment grade (AA+/AAA rated) - HDFC, TCS, Google
- Lease Remaining: Minimum 5 years
- Occupancy: 95%+ current occupancy
- Target IRR: 19-22%
Suggested Properties:
- ₹1.5L: Prestige Tech Park, Bengaluru (TCS anchor, 22.7% IRR)
- ₹1.5L: One BKC, Mumbai (HDFC anchor, 19.8% IRR)
- ₹1.5L: DLF Cyber City, Gurugram (Google anchor, 20.4% IRR)
Co-working Spaces (₹2.5 Lakh):
- ₹1.25L: WeWork Prestige Tech Park (17.8% IRR, high growth potential)
- ₹1.25L: Awfis Manyata (18.5% IRR, diversified tenant base)
Managed Residential (₹2 Lakh):
- ₹1L: Student Housing (Manipal/Pune) - 16.3% IRR, stable occupancy
- ₹1L: Luxury Apartment HSR Layout - 14.7% IRR, capital appreciation focus
Investment Timeline (12-Month Build-Up)
| Month | Investment | Amount | Cumulative |
|---|---|---|---|
| Month 1 | Prestige Tech Park | ₹1.5L | ₹1.5L |
| Month 3 | One BKC | ₹1.5L | ₹3L |
| Month 5 | DLF Cyber City | ₹1.5L | ₹4.5L |
| Month 7 | WeWork + Awfis | ₹2.5L | ₹7L |
| Month 9 | Student Housing | ₹1L | ₹8L |
| Month 11 | Luxury Apartment | ₹1L | ₹9L |
| Month 12 | REITs / Reserve | ₹1L | ₹10L |
Risk Management Framework
- Geographic Diversification: Max 40% in single city (Mumbai 30%, Bengaluru 40%, NCR 20%, Others 10%)
- Sector Diversification: No single property type > 50%
- Tenant Diversification: No single tenant across portfolio > 25%
- Liquidity Reserve: Maintain 10% in liquid assets (REITs) for emergency exits
Expected Portfolio Performance (Year 1)
| Quarter | Rental Income | Capital Appreciation | Total Return |
|---|---|---|---|
| Q1 | ₹11,250 | ₹16,800 | ₹28,050 |
| Q2 | ₹22,500 | ₹39,200 | ₹61,700 |
| Q3 | ₹42,750 | ₹72,100 | ₹1,14,850 |
| Q4 (Full Year) | ₹67,500 | ₹1,20,000 | ₹1,87,500 |
Year 1 ROI: 18.75% (₹1,87,500 / ₹10,00,000)
Monthly Income (Avg): ₹5,625 after full deployment
Portfolio Rebalancing (Annual Review)
- Trigger 1: Any allocation deviates >10% from target (e.g., commercial grows to 55%)
- Trigger 2: Property underperformance (<12% IRR for 2 consecutive years)
- Trigger 3: Major market shift (e.g., WFH trend = reduce office exposure)
Rebalancing Example (Year 2):
If commercial properties appreciate 15% but residential grows only 8%, commercial allocation becomes 48% (target 45%). Options:
1. Sell ₹30,000 commercial units on secondary market
2. Allocate new funds to residential to restore balance
3. No action if deviation <10% threshold
Key Success Factors
- Patience: Build over 12 months, avoid lump-sum timing risk
- Discipline: Stick to allocation even when commercial outperforms
- Due Diligence: Verify SEBI registration, read PPMs, check valuations
- Tax Planning: Understand LTCG holding period (24 months)
- Reinvestment: Reinvest rental income for compounding (18.75% becomes 22% with reinvestment)
5-Year Projection (₹10L → ₹25.8L):
- Year 1: ₹10L → ₹11.88L (18.75% return)
- Year 2: ₹11.88L → ₹14.11L (with reinvestment)
- Year 3: ₹14.11L → ₹16.75L
- Year 4: ₹16.75L → ₹19.89L
- Year 5: ₹19.89L → ₹23.61L
- Add Rental Income (Not Reinvested): ₹2.20L cumulative
- Total Portfolio Value: ₹25.81L
CAGR: 20.8% (including reinvestment)
vs Fixed Deposit: ₹10L @ 7% FD = ₹14.03L (₹11.78L less than fractional RE)
Disclaimer: Past performance does not guarantee future results. Real estate is subject to market risks. Returns are projections based on historical data and may vary. Diversify across asset classes.