The recent move by Sebi to permit mutual fund firms to engage in the real estate sector has unveiled an exciting opportunity for individual investors. Just a month ago, Sebi sanctioned the inclusion of real estate investments within mutual funds and issued a comprehensive set of guidelines. Previously, direct investment in real estate was reserved solely for high net-worth individuals.
Mr. Jai Mavani, executive director (head of real estate) at KPMG, remarked, "Now that realty has been integrated into the mutual fund regulations, it will ensure greater transparency and regulation. This change will motivate middle-tier investors to engage in the real estate growth narrative with minimal investment."
A KPMG report indicates that the timing is well-suited, especially as the real estate sector grapples with challenges stemming from bruised western markets, a general shortage of funds, and a standstill in the Indian IPO market. By allowing retail participation in real estate mutual funds, the liquidity will be enhanced, contributing to a healthier secondary market for real estate assets, as observed by industry analysts.
Nevertheless, the Sebi guidelines impose specific restrictions. Shailesh Kanani, an analyst specializing in infrastructure and real estate at Angel Broking, stated, "Since Real Estate Mutual Funds (REMFs) are permitted to invest only in fully constructed and ready-to-use realty assets, the potential for significant price appreciation for investors appears limited."