MFs Likely To Get More Room For Realty Play

Capital markets regulator will soon pave the way for real estate investment trusts (REITs), listing of securitised papers and quick fund raising by corporates. SEBI, which will come up with the first set of proposals on REITS, is also finalising the norms for real estate mutual funds (REMFs).

REITs offer common shares to the public, helping individual investors to enjoy the benefits of owning an interest in the securitised real estate market. REITs may be listed on stock exchanges like shares of other companies, providing easy liquidity to investors unlike the traditional way of disposing real estate. However, different countries have different specifications for the product.

On real estate MFs, the issue that needed to be addressed was calculation and valuation of the net asset value for such schemes. SEBI chairman M Damodaran said: “The accounting solution for valuation of real estate were being worked out by AMFI and ICAI. We will ensure that both the products are made available to the investors over time.”

India is currently in the process of formulating legislation for the introduction and smooth functioning of real estate investment trusts . Mr Damodaran also said rules on trading of securitised debt would be ready by December 2007. “As for the corporate bond market, work is already in progress.

We are talking to exchanges to see how quickly this can be done,” he said. SEBI is also working on guidelines to help speed up the process for raising capital. About 30 companies will derive the benefit of the new norms on fund raising by selling stocks under fast-track process. He said they would devote year 2008 for nationwide investor education campaign and encourage the market participants to take up the role of self regulating organisations (SROs) more seriously.

On FIIs, Mr Damodaran said a large number of foreign investors want to register in India. “I am happy to say that in the last one month a large number of foreign investors have approached us to invest directly in our markets. The intention is largely to see that the markets are onshore and not offshore as was in the past,” he added without giving any specific numbers.

Last month, Sebi had tightened investment rules for unregistered foreign players. It had then said it would encourage foreign funds to invest transparently by registering with Indian authorities.