« Malaysian Group Partners Opus To Develop Housing Project | Home | Discover The Exciting World Of Hyderabad Housing And Real Estate »
SEBI Nod For Realty MFs
Posted by Pradeep Sadanapalli | April 26, 2008 | 261 views
(No Ratings Yet)
Loading ...Market regulator Securities and Exchange Board of India (Sebi) on Friday allowed mutual funds (MFs) to launch real estate mutual funds.
With Sebi’s amendment of MF regulations, even investors with a small sum of money can reap the benefits of rising real estate prices. This is a change from earlier avenues of investing in realty-like directly buying property, or the recently introduced real estate investment trusts (REITs), which both required a large amount of capital.
Sponsors setting up mutual funds solely for the purpose of launching REMF schemes would be required to carry on business in real estate for at least five years. They are also required to fulfil all other eligibility criteria applicable for sponsoring an MF.
“At present, mutual funds are dealing with equity or debt. New expertise will have to be brought in ahead of the launch of a real estate fund, and so it will take around 3-6 months to launch the first of these REMFs. It would also take roughly that much time to get the requisite regulatory approvals,” said Sanjay Sinha, CIO, SBI Mutual Fund.
Every real estate mutual fund scheme shall be closeended and its units shall be listed on a recognized stock exchange. The net asset value (NAV) of the fund will have to be declared daily.
It seems like an interesting asset class but what about one of the fundamental reasons for investing in mutual funds—diversification. In a few months there will be a flood of mutual funds that are dedicated to real estate. Experts say the guidelines address those issues. At least 35% of the net assets of the scheme should be invested directly in real estate assets. The rest may be invested in mortgagebacked securities, securities of companies engaged in dealing in real estate assets or in undertaking real estate development projects and other securities.
The market regulator has also imposed caps on investments in a single city, single project, securities issued by sponsor or associate companies. “The guidelines provide a platform for diversification,” said Sinha. “REMFs will give investors a professionally managed investment in real estate as an asset class,” he added.
Experts also say that with the launch of REMFs more efficient price discovery of real estate projects will take place, with mutual funds conducting greater due diligence. Just as equity fundamentals are checked before making an investment.
LANDING PLACE
New expertise will have to be brought in ahead of the launch of a real estate fund, and so it will take around 3-6 months to launch the first of these REMFs.
At least 35% of the net assets of the scheme should be invested directly in real estate.
The rest may be invested in mortgage-backed securities and other real estate-related activities.
SOURCES:
Times Of India
Topics: Real Estate |
Comments
You must be logged in to post a comment.