Property Funds have Finally arrived

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If you have been reading the business dailies or magazines even with a cursory glance, there is one bit of news that would have caught your eye regularly - Real estate or Property funds.

What are Property Funds?

Property Funds, refers to investments in property securities allow diversification by investing across a range of different property sectors such as commercial, office, industrial, hotel and retail properties..etc. A property securities fund generally invests in property trusts that are listed on the share market, or in property related companies.

What's in it for investors?

The property funds mentioned above are not open to small investors who can invest only a few thousands of rupees. Instead, they raise resources from institutions, banks and "high net worth" investors (HNI). The minimum investment limit for HDFC India Real Estate Fund is at Rs.5 crore. Given the venture fund structure, these funds are tax-neutral entities (they don't pay any tax). Returns are distributed on a project specific basis to investors.

Appreciation in value on developing a project may be distributed as capital gains to investors; rental receipts will be distributed in the form of dividends.

Given the long gestation periods involved in real estate ventures, investors in these funds need to be prepared for a long wait say around 4-5 Years. This is what the Fund manages believe.

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Funds