Real Estate Fund Norms Soon
- Date: 2006-11-28 - Word Count: 327
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The guidelines for launch of real estate funds are likely to be issued soon, said A P Kurian, chairman, Association of Mutual Funds in India.
"We along with Securities and Exchange Board of India have worked on several areas and we are expecting guidelines soon," he said.
SEBI had in late June allowed fund houses to float real estate funds as close-ended schemes, which can invest in real estate properties, shares/bonds of real estate companies, and mortgage-backed securities.
The market regulator said these schemes need to be listed on the stock exchanges and declare net asset values on a daily basis.
Fund managers had voiced their concerns over various issues such as valuation of real estate, frequency of valuation, liquidity, nature of scheme, custodian, etc.
Funds were also concerned about meeting redemption pressures as real estate as an asset class is relatively illiquid compared with others.
Mutual funds are awaiting clarity on these aspects so as to offer these products which are likely to draw attention of high net-worth individuals, as against retail investors in the initial stages.
In the meanwhile, Kurian said there is not much of progress made in regulating mutual fund distributors.
"Sebi has to take a view on that. We will wait for Sebi's further initiative. I think it will take some more time."
Both mutual funds and distributors had welcomed Sebi's move of regulating the distribution business as the same would help in curbing instances of misselling and prevent any other malpractices.
A fund distributor said, "If distributors come under purview of Sebi, that will lead to fear factor as the market regulator can check the account books and from there find out any instances of misselling."
Another distributor said, "It will result in best practices and prevent instances such as rebating, as the regulator will take appropriate action against distributors engaged in rebating."
Under rebating, distributors normally give a part of their commission to investors to attract of more investors.
"We along with Securities and Exchange Board of India have worked on several areas and we are expecting guidelines soon," he said.
SEBI had in late June allowed fund houses to float real estate funds as close-ended schemes, which can invest in real estate properties, shares/bonds of real estate companies, and mortgage-backed securities.
The market regulator said these schemes need to be listed on the stock exchanges and declare net asset values on a daily basis.
Fund managers had voiced their concerns over various issues such as valuation of real estate, frequency of valuation, liquidity, nature of scheme, custodian, etc.
Funds were also concerned about meeting redemption pressures as real estate as an asset class is relatively illiquid compared with others.
Mutual funds are awaiting clarity on these aspects so as to offer these products which are likely to draw attention of high net-worth individuals, as against retail investors in the initial stages.
In the meanwhile, Kurian said there is not much of progress made in regulating mutual fund distributors.
"Sebi has to take a view on that. We will wait for Sebi's further initiative. I think it will take some more time."
Both mutual funds and distributors had welcomed Sebi's move of regulating the distribution business as the same would help in curbing instances of misselling and prevent any other malpractices.
A fund distributor said, "If distributors come under purview of Sebi, that will lead to fear factor as the market regulator can check the account books and from there find out any instances of misselling."
Another distributor said, "It will result in best practices and prevent instances such as rebating, as the regulator will take appropriate action against distributors engaged in rebating."
Under rebating, distributors normally give a part of their commission to investors to attract of more investors.
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Source: IndiaRealEstateblog
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