Realty MFs hit a rating block
The Economic Times, May 8, 2009, Page 15
ABSENCE OF INDEPENDENT ASSET VALUERS MAY DELAY LAUNCH OF REALTY FUNDS
Shailesh Menon & Reena Zachariah, MUMBAI
A year after the market regulator, the Securities and Exchange Board of India (Sebi), cleared the deck for real estate mutual funds, some players are showing interest, but the market may have to wait longer for the first realty fund in the absence of independent asset valuers.
While issuing guidelines for real estate mutual funds (REMFs), Sebi had asked rating agencies to make a list of accredited valuers. The market regulator is yet to hear from the rating agencies, people familiar with the matter said. “There is still no clarity as to what progress rating agencies have made in this regard,” said a Sebi official.
As per the guidelines, real estate fund managers have to take the services of a rating agency with accredited valuers to rate the assets. The valuation has to be done by two external valuers and the lowest value suggested by them will be taken into account. The assets in cities specified by Sebi will be rated by valuers once in 90 days.
Top fund houses such as HDFC MF, ICICI Prudential and SBI Mutual Funds as well as a few real estate developers had expressed their desire to float funds that invest in live real estate assets such as apartments and commercial real estate. But adverse market conditions and the crash in real estate prices have forced them to go slow on their plans to launch REMFs. “By end-2008, real estate became a sector no one wanted to touch even with a barge pole. We do not think we’ll be able to collect money to invest in real estate for the next two years,” said the channel head of a fund house that wanted to launch a REMF. A year later, two real estate developers — HDIL Constructions and Kumar Housing Corporation — have come forward and sought Sebi’s permission to float REMFs. The regulator recently asked them to make presentations regarding the finer details of the fund, said a person familiar with the matter.
These companies were asked to elaborate on aspects such as the conduct of fund, safe-keeping of investor money and payout details, he said, requesting anonymity.
The process of getting an in-principle approval will take up to a year, while it will take up to two years before the proposals get the final approval, he said. According to real estate developers, the regulator is not keen to allow builders start REMFs on their own, even though the guidelines state that any real estate firm with five-year project experience can set a trustee board and start a fund.
The Economic Times, May 8, 2009, Page 15
ABSENCE OF INDEPENDENT ASSET VALUERS MAY DELAY LAUNCH OF REALTY FUNDS
Shailesh Menon & Reena Zachariah, MUMBAI
A year after the market regulator, the Securities and Exchange Board of India (Sebi), cleared the deck for real estate mutual funds, some players are showing interest, but the market may have to wait longer for the first realty fund in the absence of independent asset valuers.
While issuing guidelines for real estate mutual funds (REMFs), Sebi had asked rating agencies to make a list of accredited valuers. The market regulator is yet to hear from the rating agencies, people familiar with the matter said. “There is still no clarity as to what progress rating agencies have made in this regard,” said a Sebi official.
As per the guidelines, real estate fund managers have to take the services of a rating agency with accredited valuers to rate the assets. The valuation has to be done by two external valuers and the lowest value suggested by them will be taken into account. The assets in cities specified by Sebi will be rated by valuers once in 90 days.
Top fund houses such as HDFC MF, ICICI Prudential and SBI Mutual Funds as well as a few real estate developers had expressed their desire to float funds that invest in live real estate assets such as apartments and commercial real estate. But adverse market conditions and the crash in real estate prices have forced them to go slow on their plans to launch REMFs. “By end-2008, real estate became a sector no one wanted to touch even with a barge pole. We do not think we’ll be able to collect money to invest in real estate for the next two years,” said the channel head of a fund house that wanted to launch a REMF. A year later, two real estate developers — HDIL Constructions and Kumar Housing Corporation — have come forward and sought Sebi’s permission to float REMFs. The regulator recently asked them to make presentations regarding the finer details of the fund, said a person familiar with the matter.
These companies were asked to elaborate on aspects such as the conduct of fund, safe-keeping of investor money and payout details, he said, requesting anonymity.
The process of getting an in-principle approval will take up to a year, while it will take up to two years before the proposals get the final approval, he said. According to real estate developers, the regulator is not keen to allow builders start REMFs on their own, even though the guidelines state that any real estate firm with five-year project experience can set a trustee board and start a fund.
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