SEBI sholw be congratulated for being steadfast in the finalisation of regulations for Real estate MFs that were put for public opinion by December 2007.
Indian players are keen to utilise the Real Estate Opportunities is evidenced by the presence of two mutual fund houses already in the periphery of the theme: ICICI Pru Real Estate Securities Fund investing in debt/equity of companies in the real estate segment, a CES and the ING Global Real Estate Fund, a reality fund that takes global equity in its fold, an OES. If one looks at NAV of the both funds as on 25th April 2008, ICICI Pru Real Estate Securities Fund is down at Rs 9.6407 per unit when ING Global Real Estate Fund is Rs. 10.80 shows the effect of international diversification in the context of a falling domestic market in the Real Estate Sector.
REITs in India are called REMFs. The committee constituted by SEBI submitted its report way back in 2001 favouring MF mode than Collective Investment Schemes (CIS) mode. The public opinion was heard from December 2007 to January10, 2008 by SEBI. The Trustees could be banks/Financial Institutions/Insurance companies and Body Incorporated. It has to be CES listed on the bourses. The investments have to be rated, valued and appraised and regular NAV declared. The Appraiser, Valuer and Rating Agency needs to be recognized by SEBI. No investment in vacant land/ non-income earning assets is possible. Single project limit for investment put at 15% and for a group 25%.
Scheme sould declare NAV daily. Two independent valuers accedted with the recognised credit rating agency are to value the asset after 90 days of purchase and the lowest of it is to be taken for computation of NAV. 35% in real estate and rest in mortgage backed securities/securities of companies engaged in real estate/undertaking real estate development projects/others - all capped at 75%.
More than that there is city/Single Security/limits to ward off portfolio concentration. Sponsor/Associates cannot have their real estate assets or that in which they have substatial rights shunted to their own REMF.
Happy investing really!!
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