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Real Estate Mutual Funds: An Alternative Investment Option
- 1. 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)
Editor's Notes
- 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.