New Delhi: Market regulator Sebi on Friday said it would issue guidelines on real estate mutual funds in the next 15 days, enabling retail investors as well to access the realty market which has witnessed a boom in the last few years.
“Sebi is ready with guidelines on real estate MFs that could be issued any day. The outer time limit to issue guidelines is 15 days,” Securities and Exchange Board of India’s whole time member T C Nair told reporters here.
Speaking at a conference on Real Estate Mutual Funds, organised by Assocham, he said all legal issues including accounting and valuation have been resolved and norms could be issued anytime. Sebi board has already given its nod, he said.
A real estate mutual fund (REMF) has investment objective to invest directly or indirectly in real estate property and should be governed by the provisions and guidelines under the SEBI (Mutual Funds), Regulations, 1996.
Assocham president Venugopal N Dhoot noted that currently only venture capital funds are allowed to offer real estate funds to high net worth individuals, institutional and global investors.
According to SEBI regulations, individual investors in a REMF must invest at least $11,500, but the current players have set minimum contribution at far higher levels.
Nair said earlier the Institute of Chartered Accountants of India (ICAI) had raised some objections to these funds and those have since been resolved.
Welcoming the decision, Association of Mutual Funds in India (AMFI) chairman AP Kurian said, “There is huge potential for the market of real estate mutual funds, and once the guidelines are issued, fund houses could come out with close ended interval funds.”
Though real estate funds set up to invest only in India have already raised modest sums, Merrill Lynch forecasts that the Indian realty sector will grow to $90 billion by 2015.
The venture capital arms of HDFC, Prudential ICICI, Kotak Mahindra, IL&FS, Kshitji Venture have such products, but only for big investors.
Regarding the declaration of net asset value (NAV) of REMFs, the AMFI chairman said that the fund houses would decide whether NAV would be made public daily or at an interval.
On the issue of high stamp duty in real estate sector, he said the industry would have to follow the law of the land. It is a complex issue to be resolved by the states and may take time.
Participants in the conference agreed that Sebi would have to issue “clear guidelines on the valuation of assets to ensure credibility of the products” among retail investors.
The Reserve Bank has also warned about potential asset- price bubble considering strong demand for housing and buoyancy in real estate prices in an environment of non-transparency.
On the issue of Real Estate Investment Trusts (REITs), which invest directly in real estate projects after collecting funds from investors through stock exchanges, Nair said no decision has been taken in this regard and it would be handled separately. Sebi had issued draft guidelines in this regard last year.