Real Estate Mutual Fund
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Real Estate Mutual Fund

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  • HDFC India Real Estate Fund HDFC India Real Estate Fund marked the entry of the HDFC Ltd. into the business of real estate funds in India. Real estate fund refers to a fund that invests mainly in real estate so as to generate income and profits for the unit holders. HDFC Ltd. has entered into an agreement with the State bank of India for its launch into the business of real estate funds. The real estate fund of HDFC India has been approved by the SEBI. The HDFC India Real Estate fund will invest in equities that are linked to companies who are mainly engaged in the business of real estate in the major cities of India. The fund had been opened for domestic institutions as well as for investors who are high-net worth individuals. The HDFC India Real Estate Fund has a Rs. 5 crore minimum contribution per investor. The fund has been under HDFC Venture Capital Limited and in this company, the State bank of India has a stake of 19.5%. The target of HDFC India Real Estate Fund was Rs. 750 crore and it also had the green-shoe option of Rs. 250 crore. The fund by HDFC India for real estate is essentially a close-ended fund for a period of 7 years. The following are the salient features of HDFC India Real Estate Fund : It will invest in the projects that are completed and real estate assets that have tenants of high net worth. It will invest in the projects that are in the developmental stage, which means that they have 1-3 years to go before commercial deployment. It will invest in the projects that are in the planning stage, which means that they have 3-6 years to go before commercial deployment HDFC India Real Estate Fund has helped to boost the Indian real estate sector and led the way as far as private enterprise participation in Indian real estate is concerned.
  • Kotak Mahindra Realty Fund Kotak Mahindra Realty Fund is the pioneer in the field of real estate equity funds in India. Kotak Mahindra Realty Fund was promoted by the Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of Kotak Mahindra Bank Limited (KMBL), and became functional in May, 2005. Kotak Mahindra Asset Management Company Limited has more than 4 lakh investors across the country. Kotak Mahindra Mutual Fund schemes are tailored to suit investors' risk capacities. The corpus accumulated in Kotak Mahindra Realty Fund is invested in real estate projects and companies that are pioneers in their trade. Further care is also taken to ensure quality of returns, growth, and creation of long-term value for all the stakeholders irrespective of the size of the investment. Some important features of Kotak Mahindra Realty Fund are - Functions as a venture capital fund The schemes are strictly adherent to the SEBI Venture Capital Fund Regulations, 1996 in India The corpus funding has been done by leading banks, domestic corporates, family offices and high net worth individuals Are close ended funds and has a life of seven years Funds are invested according to - Investment Formats Asset Class Geographical Locations Kotak Mahindra Realty Fund schemes adhere strictly to the rules and guidelines of Securities and Exchange Board of India or SEBI. Kotak Mahindra Realty Fund investments are subject to income tax exemptions. For claiming any of these exemptions, it is necessary to furnish documents which show that the said income falls under the purview of tax rebate.
  • Mutual Funds Disadvantages: 1. Lack of experience from fund managers – In a perfect world, all mutual fund managers will be experienced and know what they are doing. Unfortunately, this isn’t always the case and your return on investment in a mutual fund will depend on the managers’ experience and the decisions they make. If the fund advisors are inexperienced, then chances are that the fund will perform poorly. 2. High fees – Investments in a mutual fund will typically charge you management fees which vary depending on the fund you choose. In addition, there are also broker fees each time you buy and sell shares. Mutual funds also typically have yearly expense fees that used to cover the fund managers’ salary. 3. Still need to do research – Prior to investing in a mutual fund, it’s still essential to do research into the background of that mutual fund and whether the managers are well qualified. In addition, you will need to have an understand of different classes of assets like stocks, bonds and others that the mutual fund invests into. Having a good understanding of the stock market will help you to make a better decision when choosing a mutual fund. 4. Cash – In order to maintain liquidity, most mutual funds will need to keep a large portion of their portfolios as cash. While having ample cash is great for liquidity, money that is just sitting there will not be working for you which could mean a lower than expected return on investment.

Real Estate Mutual Fund Real Estate Mutual Fund Presentation Transcript

  • REAL ESTATE MUTUAL FUND MIM (2009-12) BY: Prashant Gavade (13) Varun Gupta (14) Shailesh Hinge (15) Pallavi Jadhav (16) Ravishankar Jaiswal (17) Dinesh Kale (18)
  • Contents
    • Basic Information
    • History
    • Relevance of REMF
    • Facts & Figures
    • Future Aspects-Pros & Cons
    • Case Study
    • Conclusion
  • Basic Information
    • What is Mutual Fund?
    • What it means
    Investors Markets (volatile, has fluctuati on) Trust (pool of money) Contribute money Invest in markets Receive dividend/capital appreciation Receive interest, dividend or capital growth
  • Basic Information
    • Type Of Mutual Fund:
      • By Structure
        • Open-Ended – anytime enter/exit
        • Close-Ended Schemes – listed on exchange, redemption after period of scheme is over.
      • By Investment Objective
        • Equity (Growth) – only in Stocks – Long Term (3 years or more)
        • Debt (Income) – only in Fixed Income Securities (3-10 months)
        • Liquid/Money Market (including gilt) – Short-term Money Market (Govt.)
        • Balanced/Hybrid – Stocks + Fixed Income Securities (1-3 years)
      • Other Schemes
        • Tax Saving Schemes
        • Special Schemes
          • ULIP
  • REMF
    • REMF
    • Like mutual funds, real estate funds (or Real Estate Investment Trusts – REITs as they are commonly referred to in the US) are founded by a group of real estate professionals/experts to ‘manage’ property/real estate for the investor.
    • REMF Objective:
    • Raise funds for the expansion of the retail businesses by means of real estate development.
    • The introduction of REMF would provide required capital for the development of retail infrastructure.
    • The Real Estate Mutual Funds is expected to enhance the quality of the housing projects.
  • REMF
    • 3 Different ways to invest in Real estate:
    • Owning Real Estate - this strategy involves the investor selecting and purchasing individual real estate properties themselves.  There are many experts that can help investors to get started in this area.
    • Real Estate Investment Trusts - companies established as trusts that invest in real estate, mortgages, or a combination of each.  Real estate investment trusts are often referred to as REITs.
    • Real Estate Mutual Funds - funds composed of real estate companies, companies supplying services to the real estate market and real estate investment trusts.
    • Real Estate Mutual Funds - Prominent Players
    • HDFC Property Fund
    • Kshitij Venture Capital Fund (A group venture of Pantaloon Retail India Ltd)
    • DHFL Venture Capital Fund
    • Kotak Mahindra Realty Fund
    • India Advantage Fund (ICICI)
  • HISTORY
    • Birthplace of Mutual Funds – USA
    • History in India:
      • 1964-1987 (Phase I) – Growth of Unit Trust of India
      • 1987-1993 (Phase II) – Entry of Public Sector Funds
      • 1993-1996 (Phase III) – Emergence of Private Funds
      • 1996-1999 (Phase IV) – Growth and SEBI Regulation
      • 1999-2004 (Phase V) – Emergence of large & uniform Industry
      • 2004 onwards (Phase VI) – Consolidation and Growth.
  • RELEVANCE
    • As of now, the real estate window is open only to high networth individuals (HNIs), institutional investors and global investors.
    • ICICI Venture, with mobilisations in the region of Rs 10 bn (Rs 1,000 crores)
    • HDFC Property Fund (Rs 7.5 bn) are among the first off the block with their real estate products.
    • Pantaloon Group (Kshitij Venture Capital Fund)
    • Kotak Group are some of the other names that plan to roll out real estate funds soon. Not surprisingly, overseas investors have also taken note of the opportunities in the Indian real estate segment.
    • Tishman Speyer Properties, a US real estate company, has already outlined plans for the Indian property market in association with ICICI Ventures. Others are also expected to make a move towards Indian shores.
  • Facts & Figures
    • HDFC India Real Estate Fund
    • The HDFC India Real Estate Fund has a Rs. 5 crore minimum contribution per investor. The fund has been under HDFC Venture Capital Limited and in this company, the State bank of India has a stake of 19.5%.
    • The target of HDFC India Real Estate Fund was Rs. 750 crore and it also had the green-shoe option of Rs. 250 crore. The fund by HDFC India for real estate is essentially a close-ended fund for a period of 7 years.
    • The following are the salient features of HDFC India Real Estate Fund:
    • It will invest in the projects that are completed and real estate assets that have tenants of high net worth.
    • It will invest in the projects that are in the developmental stage, which means that they have 1-3 years to go before commercial deployment.
    • It will invest in the projects that are in the planning stage, which means that they have 3-6 years to go before commercial deployment
    • HDFC India Real Estate Fund has helped to boost the Indian real estate sector and led the way as far as private enterprise participation in Indian real estate is concerned.
  • Facts & Figures
    • Kotak Mahindra Realty Fund:
    • Kotak Mahindra Realty Fund is the pioneer in the field of real estate equity funds in India. Kotak Mahindra Realty Fund was promoted by the Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of Kotak Mahindra Bank Limited (KMBL), and became functional in May, 2005. Some important features of Kotak Mahindra Realty Fund are -
    • Functions as a venture capital fund
    • The schemes are strictly adherent to the SEBI Venture Capital Fund Regulations, 1996 in India
    • The corpus funding has been done by leading banks, domestic corporates, family offices and high net worth individuals
    • Are close ended funds and has a life of seven years
    • Funds are invested according to -
      • Investment Formats
    • Asset Class
    • Geographical Locations
    • Kotak Mahindra Realty Fund schemes adhere strictly to the rules and guidelines of Securities and Exchange Board of India or SEBI. Kotak Mahindra Realty Fund investments are subject to income tax exemptions. For claiming any of these exemptions, it is necessary to furnish documents which show that the said income falls under the purview of tax rebate.
  • Pros of investing in REMF
    • It allows investors to invest according to their income and financial circumstances;
    • The portfolio of real estate assets will be a lot more diversified than a single home with assets ranging from office space to residential properties all around the country as well as securities based on the real estate sector; and
    • Investors don’t have to deal with the legal and maintenance hassles of owning property and may instead rely on the professional expertise of the AMCs.
    • Finally if they need quick money, these funds are liquid
    •  
    • But while property rental income provides an element of stability, REMFs are still susceptible to fall in property prices. The real estate sector in India is characterized by low liquidity and price inefficiencies. Thus, the sector will take some time to mature. Funds are going to be close-ended with minimum three-year duration. Real estate sector projects have higher gestation periods. Thus, investors have to be patient and cannot expect quick bucks.
  • Cons of investing in REMF
    • 1. Lack of experience from fund managers
    • 2. High fees
    • 3. Still need to do research
    • 4. Cash
  • Conclusion
    • REMFs provide better alternative for the real-estate companies to raise money from the capital markets for their requirements. As the investment is monitored by SEBI therefore, it will be structured. REMFs are just like any other mutual fund, they provide the benefits generally provided by the mutual funds, like pooling of resources for greater benefit, tax liability on investors which is moderate. REMFs are sector specific funds which inherently have their own share of risks as the returns are dependent on the rise and fall in the sector. However, with the real-estate sector showing commendable growth, the investments are secure. The investment options for the investors have been made broad based as it includes right from investing directly in property to securities of real-estate companies dealing in which will mean lower risk for the investors as it will ensure diverse investment opportunities thereby reducing the chance of losses. Therefore, the REMFs provide the investors an opportunity to be the part of real-estate boom in India.