The Union budget 2001 is likely to usher in real estate mutual funds (MFs) in the country.

According to news report appearing in a leading financial daily, the Indian mutual fund industry looks to set to witness the launch of real estate MFs as provisions to this effect are expected to be announced in the Union budget 2001.

MFs with considerable real estate expertise (HDFC) have chalked out ambitious plans to launch their real estate offerings, which will take shape once the regulations for such funds are in place. Once real estate MFs get the green signal from the capital market regulators, it will be another source of investment for the investor community. Property unlike stocks and bonds don't come cheap. If an individual investor was to invest in property, he would have to shell out lakhs, just like an investor who would want to invest in stocks (especially software) would have to shell out tens of thousands of rupees. So what works for stocks and bonds can also work for property.

Investment in property requires a totally different set of investment skills. It is not something any MF can handle. Housing finance companies (HFCs) like HDFC will definitely hold the roost in the initial stages and investors will not have much to choose from.

The property market in the country is still not developed and there is very little transparency in dealings, which will definitely have some impact on the real estate MF industry. Moreover, the builder-criminal nexus has given property a bad name in the past and has seen many investors exit the property scene in a hurry. So the level of interest a real estate MF will develop remains to be seen.

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