‘Investors should check credentials of the fund house before investing in REMFs’

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debentures, mortgage backed securities and finally listed shares of the real estate companies.

The MF industry is of the view that the calculation of Net Asset Value (NAV) of a REMF is as complex as the valuation of a property and is difficult.to arrive at an accurate figure. So, how do you deal with this?

Whenever the regulator comes up with some new asset class first time in the country, some people get associated with finding difficulties with it. I would not look that these difficulties are insurmountable at all. The valuation needs to be done every three months. Fund houses have to take the services of a rating agency that will have a list of accredited valuers. The name of the valuers will be published. Two valuers will conduct the valuation of the property and the lower valuation of the property will be taken into count. I do not believe that it cannot be done.

The terms and conditions of offering the scheme are difficult for the smaller players to comply with?

It is not a question of big or small. It is a question of expertise. Some conditions are their in the regulations to test expertise and credibility. The fund house has to demonstrate that they have the expertise to mange the money. If any real estate developer wants to set up an MF and wants to offer REMF, then the entity should have five years of track record which I think is a very tough thing.

Taxation is another issue to attract the retail investors into this fund. What tax concessions do you expect from the government for this fund?

Investing in the mutual fund schemes already has some tax benefits. If you buy a real estate asset, it is treated long term if you hold for three years and you pay 20% tax along with other surcharges. And, if you put money in the REMF, then it is treated long term after one year which attracts 10% STCG. So, the taxation is almost double in the physical real estate.

Do you think with this investment instrument, the property rates will come down as the demand for the physical real estate will come down?