Real Estate Mutual Funds (REMFs) are all ready to roll into the Indian capital market. This article provides a curtain raiser to the same drawing lessons from its American counterpart.
Yes,
it is official. After years of false starts, the road is
now officially clear for Real Estate Mutual Funds (REMFs)
to be launched in India. This move will not only have far-reaching
effects for individual investors by giving them better asset-class
diversification, but also have an effect on the real estate
industry in the country.As
the name itself is quite self-explanatory, REMFs are mutual
funds that invest investors' money in the real estate.REMFs
are the counterparts of American Real Estate Investment
Trusts (REITs). They are called `Investment Trusts' because
they necessarily have to pass on 90% of all profits earned
by them to the unit holders, and this way they do not get
taxed on the profits while, in turn the profits are taxed
only when once they are in the hands of the investors.
The
investment market regulator, Securities and Exchange Board
of India (Sebi) has allowed the Mutual Funds to offer REMFs.
The real estate market was earlier only open to private
players, foreign private equity funds, and venture capital
realty funds. This move will allow many a retail investor
to participate in the real estate boom in the country.
Sebi
has initially allowed close-ended funds (for three years)
to be launched. This means that investors cannot sell the
funds back to the mutual fund company any time they want
to. However, Sebi has directed that all such funds compulsorily
will be listed on stock exchanges and the companies have
to declare their Net Asset Values (NAVs) daily. |
