Real Estate Mutual Funds Yet to See Light of the Day
By News Real Estate India [HotPropertyIndia.com],
Posted on Sun Sep 28th, 2008 15:24:30 PM
It has been more than four months since the Sebi gave a go-ahead to mutual funds
to launch real estate mutual funds.
But, none of the Asset Management companies are in hurry to come out with a
REMF. Experts say that a lot of price correction is set to happen in the sector and
real estate mutual funds (REMF) would only come after this market turmoil is over.
Financial observers say real estate sector is going through a bad time. They are
facing huge financial crunch as the RBI has tightened credit disbursement policy.
Most of the developers are raising money from independent financiers and are
paying interest rates anything between 30 to 50 per cent.
“Real estate developers are in deep mess right now. Most of the companies do not
have money to complete mid-way projects. Prices will come down very soon and
hence, no company will launch real estate funds till then,” says a top executive of a
financial company, whose company also lends money to developers.
Chief investment officer at ING Mutual Fund, Arvind Bansal, says: “The real estate
prices have not yet corrected across India and everyone will prefer to come out with
REMF at the end of the cycle in order to reap maximum benefit. Hence, these funds
may take some time to come.”
Jagannadham Thunuguntla, head of capital markets of brokerage firm SMC Group
says, “REMF is not even amongst possible options for us. I will be very surprised to
hear of any company coming out with REMF in the next 4-5 months.”
SMC has recently tied up with South Africa’s Sunlam Investments to launch an asset
management company. Sandesh Kirkire, CEO, Kotak Mahindra Mutual Fund, says,
“Currently, the market sentiments are negative and we are working on it. It will take
some more time.”
Despite the guidelines being ready and after creating initial buzz in the market, real
estate mutual fund is yet to see light of the day. A P Kurian from AMFI says, “Mutual
fund companies will take some time to come out with REMF. Moreover, it usually
takes some time come out with any new product.”
REMFs are required to invest at least 35% of the net assets of the scheme directly in
real estate although there is no ceiling on the maximum limit. The Sebi had approved
the guidelines for real estate mutual funds and also gave its nod for lifting the lock-in
period for venture capital funds which had remained invested for over a year.