Real estate mutual funds (MFs) planned by many asset management companies may finally take shape as capital market regulators are considering the proposal for the first time.

Some MFs like HDFC are waiting in the wings to come out with a real estate MF. Their plans will begin to take shape once the regulations for such funds are in place.

Deepak Satwalekar, managing director of Housing Development Furnace Corporation (HDFC) while speaking at a press conference remarked that setting up of the real estate mutual funds will not only infuse additional funds in the housing industry, but will contribute to improving the quality of construction and maintenance.

Once real estate MFs get the green signal from the capital market regulators, it will be another source of investment for 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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