India Real Estate Mutual and Venture Funds

To invest in a decent sized real estate venture in India today, you either have to be ultra rich and even if you are, you have to plunk down a ton of money and wait for a long term to see the returns trickle in. Things are about to change in the Indian Real Estate Investment Trusts / Funds space with a number of funds dropping the minimum investment required to take advantage of these options.

A real estate investment trust also known as a REIT across the world is a special vehicle through which you can invest in real estate growth without having to deal with the burden of developing, managing and realization of the profits. REITS are very popular in the western world and the same instruments are now available to Indian Investors.

SEBI has recently released the guidelines for REITS that are expected to enter the market in 2008. SEBI's guidelines also promote diversification through various restrictions including a cap of 15% in a single project, 25% into a single developer and an overall cap of 20% to incomplete or inprogress projects. These restrictions we expect will drive funds to start generating more dividends through acquisition and management of atleast a few existing properties instead of waiting for new projects to complete.

REITS in India will work differently than their western counterparts due to the above and other guidelines issued by SEBI. Real Estate funds in India are restricted from listing as stocks in the exchange like their western counterparts. REITS in india are required to list as mutual funds and investors will purchase these instruments like any other mutual fund they would buy in the current market. SEBI requires these funds to invest in the underlying asset class of real estate and not in stocks of real estate companies.

This year, the watered down versions of original realty funds including ILFS Milestone Real Estate Fund, Peninsula Real Estate Fund, HDFC Real Estate funds etc., were only available to HNI circles and it wont be long before these options are available to the average investor.