Fractional Home Ownership

What is fractional ownership?

Fractional home ownership, a new tactic of owning property in Kenya, is enabling citizens to own luxury homes that were previously attainable only by the rich.

Also known as fractional ownership or simply real estate fractional ownership, fractional property ownership is a type of ownership structure that allows multiple individuals to collectively own a share or a fraction of a property.

Instead of buying the property individually, a group of buyers acquire portions of ownership, often represented as a specific number of weeks or months of usage throughout the year.

How it works

Thanks to the novel arrangement, multiple owners can enjoy the benefits of the property without the full financial obligations associated with sole ownership.

The property is usually managed by a management company that handles maintenance, upkeep, and scheduling of usage among co-owners.

Fractional ownership is a hit in Mombasa and Malindi where up to 12 buyers can own shares in a holiday home – which they can occupy through time-share or rent it out.

Where 12 people own shares in a unit, it means that each buyer owns the property for one month every year. Income is shared, factoring in the time each co-owner availed the apartment for letting.

The concept is reserved for luxury homes in vacation destinations, and it is offered by both multi-unit developers and high-end resorts.

Fractional homeownership made its way into Kenya a few years ago when a local developer, Baobab Development, rolled out a 32-unit housing complex in Malindi where an individual can own an apartment for four weeks every year after paying a one-off fee of Sh1.8 million.

Baobab Group’s sales manager, Miriam Magare, said: “Most of them (buyers) are here for business and therefore prefer buying shares of the house and then receiving returns even when away because we rent the houses on their behalf.”

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Every co-owner is allocated a week each quarter of the year until the four weeks elapse, said Ms Magare, who added that the apartments come with a full legal title on a 99-year lease.

Fractional homeownership, popularised by American investors in the 1990s, is almost similar to a time-share except that it has fewer buyers (12 maximum) which increases the amount of time available to each buyer.

It allows an individual to take part in a valuable asset without raising the cash to buy the entire property outright.

The concept is very similar to owning shares in a company.

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