Real estate mutual funds


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Real estate mutual funds

  1. 1. Prepared By:Prashant Maharshi
  2. 2. The term real estate is defined as land, including the air above itand the ground below it and any buildings or structures on itthat are intended to be of a permanent nature. A mutual fund is a type of professionally-managed collective investment scheme that pools money from many investors to purchase securities
  3. 3. Investors Receive dividend/capitalContribute appreciationmoney Trust (pool of money) Receive interest, dividendInvest in or capital growthmarkets Markets (volatile, has fluctuation)
  4. 4. Real estate fund is a fund that buys, develops, manages andshells real estate assets and allows various participants smalland large to invest in a professionally managed portfolio of realestate properties.Like mutual funds, real estate funds are founded by a group ofreal estate professionals/experts to ‘manage’ property/realestate for the investor.
  5. 5. Benefits to the individual Protection from legalities Affordability Liquidity Increase in rental housing generation Expected to enhance the quality of the housing projects.
  6. 6. Benefits to the sector Flow of funds in the sector Sector will become more organized More credibility to the sector Availability of foreign investments Economic and social benefits Growth of real estate sector can boost the GDP Opportunities of employment
  7. 7. Cont… Growth of ancillary industries Help in the process of slum development Help in development of tourism Funds for the development of B & C grade cities Availability of funds to the government for infrastructure development It can also help in improving the penetration of mutual funds in India. REIS will also help to tap the investments from larger section of Indian Market
  8. 8. AffordabilityAge Old Acts and RulesGovernment AdministrationForeclosureHigh cost of fundsInformal SectorCompetitionLegal HurdlesConstruction Finance
  9. 9. Liquidity riskRisk because of high maintenance burdenRisk due to high government controlsRisk due to real estate cyclesRisk due to legal hurdles and complexityRisk due to lack of informationRisk due to high transaction cost thus formingbarriers to entry and exit
  10. 10. Internationally there are two structures, which real estate funds follow REMF STRUCTURE REIT Structure PMV StructureFollowed In USA and CANADA Followed In UKREIT is a corporate In this structure, the funds is instructure, which collects money the form of a trust and operatesfrom the investors and invests in just like an open ended mutualreal estate assets to earn money fundin the form of rentals and lease.
  11. 11. REIT Structure PMV StructureFollowed in USA & Canada Followed in UKClose ended fund Open ended fundUse leverage Does not use leverageAre listed on the exchanges Not listed on the exchanges
  12. 12. In April 2008, market regulator SEBI announcedguidelines for REMFsThere is a hot discussion floating in India about whichmodel the Indian market should adopt.Should it adopt the US structure or the UK structure orfollow an altogether new structure for a fund, whichinvest in Real Estate.
  13. 13. There is high chances that the real estate mutual fundintroduce in India. In India REMFs will follow UK basestructure with some changes. And the real estate area ismajorly advantages area for the inventors.