Real Estate is emerging as a new asset class and is expected to fight for its share of the cake with traditional asset classes like equities and debt. Real-estate mutual funds have already made a mark in several countries and are raring to enter the mutual fund arena in India soon. Kavita Hurry, managing director and CEO of ING Vysya Mutual Fund, who also steered private equity investment earlier in her 19 year career, discusses issues pertaining to real estate mutual funds with BS Srinivasalu Reddy:
What is the way ahead for real-estate mutual funds (REMFs) in India?
The first step towards REMFs in India was initiated by the capital market regulator, Securities and Exchange Board of India (Sebi), by issuing the norms for REMFs. But, this asset class would get a shot in the arm only after setting up of real estate investment trusts (REITs), as is the practice internationally. They infuse confidence among investors, because they also serve as custodians of title deeds. REITs pool various real estate assets, including warehouses, buildings, industrial estates and parks, malls, commercial and residential premises and get listed on the stock exchange to enable investors to buy and sell. They afford an opportunity to diversify the portfolio within that limited sense as well.
According to you, what initial glitches need to get ironed out?
It’s a long way before the real estate sector becomes organised and transparent. Only reputed real estate companies would be in a posi tion to inspire confidence among the investors, to start with. On the other hand, there are innumerable processes adopted by different states from title verification to stamp duty and registration. Title verification it self takes over a couple of months in several states many of which, have not repealed the Urban Land Ceiling Act, so far. Archaic rent control acts are still alive in many cities and exorbitant municipal taxes in many places are not congenial for growth of REMFs.
Are you planning to launch an REMF soon?
We will definitely have presence in this space, given our experience and presence in the real estate markets of several countries. This is going to be one of the three schemes, on the drawing board right now. The other two, which will add to a suite of nine equity and debt funds in our portfolio, are capital protective fund (that assures return of the principal amount even in the worst case scenario) and an India focussed offshore fund.
What are the areas for business growth in future?
Right now, we are concentrating on debt schemes that are basically targeted at companies and institutional investors. There is a lot of scope for their retail penetration through fixed maturity (debt) plans that offer better returns than bank deposits. Being more liquid, and having shorter maturity periods they provide better investment option than bank deposits. The main planks for pushing them would be returns, safety and liquidity.