25 lakh may not be sufficient to invest in realty funds
Those looking to invest in real estate funds, may have to keep at least a crore ready. The minimum investment of Rs 25 lakhs would not likely be able to fetch the expected returns in the near future.
Real estate funds have been yielding post-tax returns annually of about 10 to 20 percent approximately, for which they have been gaining prominence among other investment options. Besides this, many other factors have also contributed in enhancing the importance of such funds.
Managed by renowned professionals
Realty funds are managed by professional experts having good expertise in the real estate, finance as well as investment sectors. At present, investment biggies including HDFC, ICICI, Piramal, Birla, Dewan Housing and Milestone have been managing six real estate funds, which have been approved by market regulator Securities and Exchange Board of India (SEBI).
Safe and reliable
The funds in real estate projects undoubtedly hold huge potential of providing good yields. The projects in which these funds get invested in are legally sound and are also free from regulatory issues. Being run by renowned real estate developers who have successfully delivered projects in the past, they are reliable and hassle-free. The funds make for a safe and potential investment destination for the investors.
Though high in ticket size, they are risk-free
Real estate funds are mostly invested in projects that require high level investments for which small-ticket size investments are not considered sufficient. Not only the investment amount is big, but the yield expected is generally much bigger than it.
In this case, the investors enjoy benefits similar to mutual funds in which the asset management company collects funds from many individuals and invests it on their behalf. However, the real estate funds are of better advantage than MF’s because they are not invested in stocks and hence they are free from associated risks and instability.
Investing in real estate funds
Currently, Piramal India REIT Fund V is open for subscription. The target being sought by this fund is Rs 1,000 crore and it is already close to the number. It is likely to close shortly once the target figure is reached. If investors seem to miss this fund, then they can look forward for SEBI’s move as it is likely to reintroduce Real Estate Investment Trust (REIT) in India, which would have a ticket size lower than Rs 2 lakh too.
According to JLL’s country head, all REIT schemes will initially have to be close-ended real estate investment schemes aimed to invest in real estate projects in order to provide returns to unit holders. Returns are usually generated from capital value hikes or through rental income from real estate.
