The Hindu Business Line : AMCs await full SEBI guidelines for foray into real estate MFs

SEBI guidelines on Real Estate Mutual Funds (REMFs) have prompted most asset management companies (AMCs) to plan a foray into this new area of investment. But they sound cautious and are awaiting detailed guidelines on the issue. AMCs such as Quantum Mutual Fund, BoB, ING Vysya and Fidelity Fund Management Pvt Ltd are keen to venture into this segment.

"ING is the world's largest player in real estate mutual funds, so we will certainly look at it at some point," said Ms Kavita Hurry, CEO, ING Mutual Fund.

"The notification of guidelines for REMFs by SEBI is a very welcome step that will help expand the industry as we will be able to increase our product offerings. Investors too will benefit as they will have another asset class that will help diversify their portfolio," said Ms Ashu Suyash, Country Head, Fidelity Fund Management Pvt Ltd.

Mr Sandesh Kirkire, CEO, Kotak Mahindra AMC, said REMF schemes are very necessary for diversification of a company's products.

Awaiting expertise

While Quantum Mutual Fund has raised funds overseas forreal estate MFs in India, other mutual fund houses are looking at generating the right kind of expertise to get started in REMFs.

"Real estate is a different ball game to understand. Mutual funds are not like stock exchanges; here the valuations are more word of mouth and trades do not happen everyday, so these grey areas need to be looked at," said Mr T.P. Raman, Managing Director, Sundaram BNP Paribas Mutual, which will enter the segment once it has proper expertise.

Areas of concern

The areas of concern that mutual funds feel are tradability issues along with technicalities. Mr Chavali, Managing Director, BoB AMC, feels that real estate fluctuations happen when stories on property prices or price hikes appear.

"Real estate funds will require long-term investors, one cannot enter and exit everyday and also awareness will have to be created in the investor's mind since Indian investors are used to investing in one property. All this can be achieved with expertise like property developers, lawyers and mutual fund people for REMFs," said Mr Vivek Kudva, President, Franklin Templeton Asset Management (India) Pvt. Ltd.

The major concern of mutual fund houses was over SEBI guidelines regarding valuations and price discovery of real estate. "Daily NAV is a little difficult," said Mr Ashwin Ramesh, Director, Primary real Estate Advisors of Quantum AMC. "Valuation of unlisted securities is the most important concern," said Ms Kavita Hurry.

Mr Kirkire said: "Real estate is not an organised and transparent sector, so there is a need to put in place an NAV mechanism. Also, the there is bound to be some degree of subjectivity in valuation."

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