MFs Suspicious About Real Estate Sector

Mumbai: The global funds are enthusiastic about the prospects of India's real estate sector and have committed billions of dollars, but the Indian mutual funds are treading cautiously. The fund managers are concerned about overstretched and unjustified valuations of real-estate stocks and are quietly reducing their exposure to them. Valuation was always a worry with this sector. The bleak view of the domestic fund houses on real-estate companies was recently reflected during the initial public offering of DLF. The global funds rushed in to buy a bigger pie in the Delhi-property developer, which came out with India's biggest IPO of Rs 9,187 crore by selling 175 million shares. While the qualified institutional investors portion swelled 5.13 times, the mutual funds put in bids for a mere 14.5 million shares. The exposure of MFs to realty has not grown to that extent as concerns over valuations continue. Besides, the increasing interest rates could also hamper the pure real-estate companies. But, we believe there are a few stocks which are reasonably valued. The fund house has a significant exposure to realty stock Unitech, which is among the top-five companies in its portfolio. The fund's exposure to the sector could improve as more and more real estate companies get listed. The real-estate sector will see companies such as Housing Development and Infrastructure (Rs 1,400 crore), Omaxe (Rs 1,400 crore), IVR Urban Prime (Rs 200 crore) and Kolte Patil (Rs 200 crore) hitting the markets in the coming weeks.