Real Estate Mutual Funds: A New Avenue for Investment
The Securities and Exchange Board of India (SEBI) has given the green light to mutual fund (MF) houses to introduce real estate investment schemes, a decision met with enthusiasm after a two-year wait. This opens doors for smaller investors to participate in the real estate market without needing substantial capital.
How Real Estate Mutual Funds Work
Similar to other MF schemes, investors contribute funds, which are then pooled together and invested in real estate and related assets according to SEBI regulations. The units are listed on the stock exchange, enabling daily tracking of the net asset value (NAV) and providing investors with transparent insight into their investment growth.
Advantages for Individual Investors
Mr. Suresh Sadagopan, Chief Financial Planner at Ladder 7 Financial Planners, highlights a key advantage: "The real estate investment trusts which already exist have high ticket size of 25 lakh or above. Now, with a few thousands, people will get an opportunity to invest in real estate MF". This ease of entry is a major stepping stone into real estate investment.
Understanding the Risks and Considerations
Before rushing into real estate mutual funds (REMFs), it's crucial to acknowledge the associated risks and plan accordingly. While REMFs offer portfolio diversification, determining the appropriate investment percentage requires careful consideration. Remember that real estate markets fluctuate, and despite recent years' price escalation, understanding market cycles and considering long investment timelines is important for successful real estate investment.