SEBI allows launch of real estate mutual fund scheme

Saturday, 26 April 2008, 05:25 Hrs
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Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has decided to allow mutual funds (MF) to launch real estate mutual fund (REMF) schemes.

Announcing this here Friday, the market watchdog said in an official statement that it has amended the SEBI (Mutual Funds) Regulations 1996 to permit the launch of REMFs.

The notification, citing eligibility criteria for those seeking to launch REMFs, stated that they would have to be in the field of real estate business for a minimum of five years and have adequate experienced directors.

The SEBI added that the schemes will have to be close-ended with its units listed on a recognised stock exchange wherein the net asset value (NAV) will be declared daily.

Such schemes will have to invest at least 35 percent the net assets directly in the real estate business and the rest in in mortgage backed securities and securities of firms involved in real estate business.

"Taken together, investments in real estate assets, real estate related securities (including mortgage backed securities) shall not be less than 75 percent of the net assets," the statement said.

The regulator added that the assets of the asset managers should be valued every 90 days.

SEBI has also imposed caps on investments in a single city, single project, securities issued by sponsor or associate companies with clear restrictions whereby, "MF will not be allowed to transfer real estate assets among its schemes and REMF will not be allowed to undertake lending or housing finance activities."

The notification, however, has granted a go-ahead to MFs wanting to invest in any real estate asset owned by the sponsor or the asset management company or any of it's associates.
Source: IANS
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