In view of real estate projects taking at least 2-3 projects to complete, the Securities and Exchange Board of India (SEBI) is considering a move towards enforcing a minimum closing period of three years for real estate mutual funds (REMFs).

SEBI also plans to allow funds to announce their net asset values (NAV) every quarter instead of daily as is currently the practice.

A tax regime for real estate mutual funds is also being worked on, and will be announced in the next budget. It is likely that the US model will be followed, where the trusts are exempted from tax provided they share 90% of their taxable income as dividends with investors.

SEBI would most likely be guiding REMFs to invest 70 to 80% of their funds in real estate projects directly, and the rest in real estate companies.

The Real Estate Investment Trusts (REIT) in the USA with assets worth $350 billion have been operating for the last 5 decades. In India, SEBI, at its board meeting on 26th June 2006, had approved the guidelines for real estate mutual funds, using the REITs as a base model. A Confederation of Indian Industry (CII) study says that real estate is an income generating asset and leasing residential and commercial property fetches returns of 6-9% and 8-11% respectively.

HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund from Pantaloon Retail and India Advantage Fund (ICICI) are some of the major real estate funds in India.

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