• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Our Bureau

Mumbai, April 26 Though they are excited about the new asset class thrown open to them by SEBI’s notification on Real Estate Mutual Funds, mutual fund houses are asking themselves whether they are adequately equipped to offer this product.

“It is altogether a different animal and will require different skill-sets,” said Mr Dhirendra Kumar, Chief Executive, Value Research.

Industry watchers said Prudential ICICI, HDFC and Lotus India Mutual Funds could be among the first off the block, given the advantage they enjoy of past experience in real estate, either directly or through their associate companies.

Lotus India Mutual Fund’s CEO, Mr Ajay Bagga, said the company would draw on the experience of its parent company, Singapore-based Temasek Holding.

“This asset class will be available to all investors, including retail, unlike earlier when only HNI’s (high net-worth individuals) or super-HNIs were investing in real-estate funds through private equity,” said Mr Sandesh Kirkire, Chief Executive Officer, Kotak Mahindra Asset Management Ltd.

“Retail investors who do not have big chunks of money can diversify their portfolios now with a lower ticket-size of investment,” said Mr Sandeep Neema, CFA, JM Financial Asset Management Pvt Ltd.

Overall, the MF industry appeared satisfied with the guidelines; valuation would be a key issue, they said.

“There is asymmetrical information in real estate so the valuer will have to arrive at a capital value based on a combination of factors, including rentals,” Mr Bagga said.

The REMF guidelines as framed by SEBI provide for something that is in the nature of a balanced fund, said an official with a research firm that tracks the industry.

Mr Dhirendra Kumar, CEO, Value Research, was of the opinion that real-estate debt securities (mortgage-backed securities) do not have the characteristics to attract someone keen to invest in real estate. “It doesn’t share the upside of a real-estate boom but shares many of the possible downsides that will show up in a real-estate slump. If the intent was to cushion real-estate risk with some stable fixed income securities, then these funds should be able to invest in any kind of debt securities,” he said.

“There is the issue of valuation because the underlying market is not a transparently traded market and there is a need for independent valuers who can help determine the value of the units of the scheme,” said Mr Kirkire of Kotak Mahindra Asset Management Ltd.

“We are happy and welcome this move from SEBI. It opens up opportunity for the common investor to take advantage of the real-estate market where otherwise only huge sums of money had to be invested through private equity etc,” said Mr A.P. Kurian, Chairman, Associations of Mutual Funds in India.

“The issue of valuations and other details have been harmonised and both the Institute of Chartered Accountants of India (ICAI) and AMFI are satisfied with the results,” he added.

More Stories on : Real Estate & Construction | New Fund Offer | Mutual Funds

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Ramaseshan is new chief of NCDEX

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line