Things could not have been better for mutual funds (MFs) with debt-dedicated players riding on a high and equity coming back into action. But MFs are looking forward: a diversification in their investment portfolio through the launch of real-estate schemes in the latter half of 2003 following amendments to be made in MF regulations by the Securities and Exchange Board of India (Sebi).A clutch of frontline mutual funds are already busy giving finishing touches to their realty mutual fund schemes, with plans to hit the market in 2003. HDFC Mutual Fund and Kotak Mahindra Mutual Fund are in advanced stages of drawing up their schemes, and could be the first to be off the block.Said the Association of Mutual Funds in India’s (Amfi) chairman, A. P. Kurian: “We have been examining the possibility of launching real-estate linked products for as long as a couple of years now. We are confident about the success of such a product after having examined issues like the nature of the scheme and net asset value (NAV) calculation.”“The launch of the product will involve ammendments in the regulations laid down for MF by Sebi, following which I see excellent opportunity in the product for both investors and the real-estate fraternity,” he added.Kurian was confident that while the AMC wing of the Housing Development Finance Corporation is expected to lead the herd — due to its presence in the real-estate market — other MF players will soon follow suit.Commenting on the Sebi stance, a top regulatory official said: “The comprehensive report submitted by Amfi has been examined and Sebi is likely to chart out the roadmap for the launch of the product by January 2003.”HDFC MF’s managing director Milind Barve who headed a committee examining the prospects of MFs investing in real-estate, said: “We, as a mutual fund, are always looking forward to the diversification of our investment portfolio. We are optimistic about the success of such a product keeping in mind the Indian investor’s appetite for real estate.”Added Barve: “A real-estate investment scheme should be on the lines of an MF scheme. A typical interval fund could be a three-year closed-ended scheme, which could open at the end of every quarter for the sale of fresh units. Repurchases can be made available to investors after the lock-in period in a staggered manner so that investors receive a specific portion of their investments within specified time periods at NAV.”Opined others like Kotak Mahindra MF’s chief marketing officer, Prakash Dalal: “Real estate comes across an interesting opportunity that we are looking forward to exploring. However, plans are on the drawing board currently. And once given the go-ahead by Sebi, we are looking forward to launch a new scheme dedicated to real estate within a time-frame of seven to eight months.”On the operation of such a scheme, Dalal said that real-estate MFs may work on the principle of directly investing in property or by purchasing deeds of housing loans from banks and financial institutions (FIs). “An MF may purchase the deeds of pending housing loans with banks or FIs and earn an income from the interest that a borrower will pay on the principal,” Dalal explained.Others in the MF business also seem enthused about the launch of such a product in a pursuit to diversify their investment portfolio even as the palpable issue of liquidity remains a cause for concern for MFs.
