Mutual Funds - Capitalizing on Real Estate Potential

The real estate stocks are difficult for an average retail investor to read. Wild swings have been the order of the day. However, mutual funds that have 3-4 per cent investments in real estate stocks allow a small investor to benefit from the surges but remain protected from the troughs.

Making an informed decision is necessary for the success of your investment goals. Mutual Funds (MFs) are certainly among the most sought-after investment instruments in the market but since you have to select from dozens of mutual funds and not all funds perform well, here we demystify the world of mutual fund investing for you.

What are MFs?

MFs are the professionally managed funds that invest in the equities of various companies, including real estate, listed on the Indian stock markets. These funds are governed by the Securities and Exchange Board of India (SEBI) that safeguards rights and interests of retail investors. Any citizen of India can buy mutual fund units that are available at certain Net Asset Value (NAV) declared every day by the fund managing company.

Should you invest in MFs?

As an investor you could well think of investing in the stocks of real estate companies directly. However, in order to make successful investment, you must take a look at the kind of volatility realty stocks witness on the stock exchanges. The Realty Index clocked whopping returns of 48 per cent between Feb 7, 2007 and Feb 7, 2008, on Bombay Stock Exchange (BSE) but it’s not that every investor who pumped in his money in realty companies directly into stock markets got such returns. In fact, there would be many who bought shares at the wrong time only to witness substantial erosion in the value of their investment.

Mutual funds, at the other end, are run by fund managers who have specialized knowledge over stock-market investing, and track market movements on professional basis. This way, they are well-positioned to make suitable decisions to invest and de-invest in the markets as per the circumstances. Though mutual funds do not guarantee a win-win situation all the way, investing in proven funds actually has the capacity to meet your objectives. As a matter of fact, the specialized investment management by mutual funds has evidently produced returns as high as 80 per cent a year, which a naive investor rarely achieves in the course of direct stock market trading.

Types of Mutual Fund

Selecting a mutual fund scheme mainly depends on your risk appetite, investment horizon, and future needs. Once you work out these factors, you can choose a suitable scheme for yourself.

Meanwhile, Brix Research brings you the insights on the various types of mutual funds classified on the basis of their investment strategy and time horizons.

Corpus investment Equity or Balanced - Equity funds park their corpus anywhere between 65 and 100% in equities. Balanced funds, on the other hand, maintain a fine balance between equity and fixed income securities. The latter option offers you security and the rate of return is relatively lower than the equity fund.

Growth or Dividend - Under a Growth fund, the returns generated over the capital invested keep on accumulating, and your cost per unit increases in tandem. You can redeem your mutual fund units, in case you want to book profits. Choosing the dividend option, on the flip side, entitles you to receive returns in the form of dividend that is distributed among the investors, on a periodic basis. Although it depends on the company’s policy, dividends are generally distributed 2-3 times a year.

Open-ended or Close-Ended - On the basis of investment horizon, mutual funds are divided into two categories: open-ended and close-ended. Open-ended funds allow you to purchase and redeem units at any time, however, in case of close-ended funds; there is a lock-in period under which you cannot redeem your mutual fund units for a certain period of time.

Specialty or Diversified - A Diversified Fund allocates its corpus into different sectors of FMCG, Auto, Petro, Pharma etc. In the event of slowdown in one sector, the other one may be able to compensate it. This way an investor invests his entire corpus in different companies and enjoys the advantages of diversification.

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Jaipur - Emerging Stronger From the Financial Crisis

Jaipur, popularly known as the 'Pink City' is one of the most promising real estate destinations in the country today and is considered to possess one of the best infrastructures.

Jaipur is all set to make a mark in the realm of economic growth in the country. The Jaipur Real Estate sector is looking very bright. The state government has taken various steps to make the city the next big destination for the Foreign Direct Investments. These include widening and improvement of major roads with flyovers and railway over-bridges, regularization of residential colonies on agricultural lands and improvement of overall infrastructure.

Jaipur property prices have shot up over the last couple of years due to an upsurge in demand. This has led to initiatives by developers like Parsvnath, Vatika and Ansal, to set up residential, retail, office and commercial spaces in the city. GE capital has moved into Jaipur and this has paved the way for the entry of a number of IT companies like Infosys and Wipro, which has worked to the city's advantage. Moreover, the real estate in Jaipur is steaming with a suit of mega projects. The largest of them include Mahindra's 3000 acre SEZ (Special Economic Zone), Anil Dhirubhai Ambani Group's (ADAG) Mega City Development Plans, and Hero Honda's Rs 700 crore manufacturing plant.

Jaipur properties today have become immensely popular because of the recent influx of investments in this sector. The reasons for this are manifold -

· Close proximity to the national capital, Delhi and NCR regions.

· Promising infrastructural base, an example of which is the existent 8-lane expressway

· Relatively lower property prices in comparison to adjacent metro cities

However, according to Jaipur real estate brokers, the global financial crisis couldn't have come at a worse time. Due to low liquidity of real estate and high mobility of investor capital, the city is witnessing a price correction. There has been a fall of 20 per cent in Jaipur property prices.

According to media reports, inflation has become all pervasive, and small investors especially will take a beating, because with huge debts and rising prices of home loan interest rates, new ventures are but a distant dream. In the past when markets slowed down, real estate developers held back supply. The difference this time according to Jaipur real estate builders however is that, a lot of private equity money has gone into the development of the real estate, which will lead to softening of prices and a consequent increase in supply.

Thus, even with minor hiccups such as the above stated, Jaipur is the place to be right now. It is the focus area of all major developers and it's essential to invest early to get high returns, feel industry experts.

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Mumbai’s Residential Segment - Forever Active

Mumbai’s residential market has been active over the past two years. Most of the real estate activity in Mumbai has been in the middle to upper middle class segments, though the premium segment which has limited supply continues to attract buyers. There has been some appreciation in the values of prime properties in South Mumbai, Worli and Bandra areas.

Residential values are on the rise in the premium South Mumbai Properties. Demand continues and there are some new projects coming up in South Mumbai. This includes two towers of 60 stories each known as “S D Towers”.

The North Western and Eastern suburbs continue to be the preferred corporate locations in Mumbai. As a result, the suburban move by corporates has given a boost to residential developments. Mindspace and Hiranandani, on a regular basis, keep coming up with new developments. Relocation of the American School to suburbs has led to many expatriate officials also relocating their residences to the suburbs.

Residential categories all across the city are active. The residential market will see continued activity in the middle-class segment in Rs1-2.5 million (US$ 20,400-51,000) categories. All areas are seeing a rise in values. With office and residential projects going in tandem, real estate developers are now going in for integrated developments. Most large projects have school, college, hospitals etc incorporated as an integral part of the project.

K Raheja Corp, K. Raheja Constructions, Samir Bhojwani, K Raheja Developers, Tata Housing, GESCO, Mahindra & Mahindra, Kalpataru and Godrej Housing are the leading developers active in residential market. Central Mumbai areas such as Wadala (what were they earlier) Sion etc are coming up as preferred residential areas. Navi Mumbai market is witnessing a marginal increase in residential segment due to large off take of residential apartments by Reliance Industries.

George Gonigal provides you the best and latest information on Mumbai Real Estate Builders, If you want to Buy Apartments in Mumbai, he suggests you log on to www.magicbricks.com.

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Green Canopy Enticing Buyers in Mumbai

Weakening property demands have resulted in Mumbai Real Estate Builders being weighed down with large stocks. But the developers are using their creative skills to sustain themselves in the business. They are coming up with innovative ideas to not let the Mumbai Property market scrub down.

While green buildings have already marked their entry in the Mumbai Real Estate market, the concept of green cover is burgeoning as well. A cover of flora is provided to the client on long terraces and podiums. Depending on the project size the cover spans up to 2.5 acres, research reports. It is provided on terraces, over huge multi-level car parks and ‘relief’ on the middle floors of high-rise complexes.

Talking about the advantages, for the buyer, who is getting more environment conscious day-by-day the benefits are apparent. Besides being healthy the green canopy is also a way to reminiscence the good old way of living in the nature’s lap, feels Mr S Kapoor, Mumbai real estate agent. For the builders, the value the green canvas provides is enormous.

One of the largest such elevated gardens is being developed by Marathon Group. It is a mixed use residential-cum-commercial complex having a built-up area of about 7 lakh sq ft. The elevated garden project is 1.20 lakh sq ft in area. Also, Orbit Corporation has designed a garden and club house on the eighth floor of one of its projects, in addition to roof parks on every fifth floor of another.

According to Mumbai real estate builders, generally, the additional cost of Rs 250 to Rs 300 a sq ft for setting up the green cover has no influence on Mumbai property prices per se, that are in any case ascending Rs 10,000 per sq ft.

Moreover, on the back of lackluster sales Mumbai property rates are witnessing a dip, so to retain the interest of the buyers green canopy has now become a trend among the Mumbai Real Estate Developers.

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For a Diversified Real Estate Portfolio

The Indian real estate boom means good news to you. As a young Indian who earns well, has spent wisely and drive his own car, live in his own house and is able to meet daily expenses without too much effort, good returns from real estate investments should typically be next on your investment agenda. So how do you determine how much of your investible surplus you should invest in real estate and how much to put into financial instruments such as mutual funds and Unit-Linked Insurance Policies (ULIPs). How will your investment in a second house allow you to capitalise on the current real estate boom?

“Anybody who is looking at real estate as an investment option is currently at least in the post-35 age group,” says chartered accountant Raghu Marwah. “In the current scenario, other financial instruments score over real estate as a long-term investment option. The returns in the short and long term are more attractive.” Portfolio advisor Sanjay Mittal too agrees. “Investment in mutual funds and stock markets is liquid. But investments in the property market are not. Mutual funds yield at least 40 per cent year-on- year returns. One of my investors put in Rs 20,000 per month in the Reliance growth fund and his returns are currently over Rs. 3.6 crore in 10 years.”

This is way above that in real estate. In fact, he gives a thumb rule based on the worst performing systematic investment plan mutual fund over the last 10 years. If you have invested for over seven years, returns are normally the amount invested multiplied by the number of years it was invested for. In the current scenario there is a phenomenal growth expected in sectors such as hospitality, logistics, warehousing, healthcare, etc. “Investment in real estate mutual funds, especially at a time when the SEBI has framed the guidelines, will be a bonanza for retail investors,” explains a market analyst.

The retail investor has more to look forward too in the future from real estate markets. The Securities and Exchange Board of India (SEBI) has already issued draft guidelines for Real Estate Investment Trusts (REITs) a sound financial instrument in developed real estate markets around the world. “This will open up a class of investment to the real estate retail buyer that was earlier not possible,” says Goel. Till now investors ended up exposing themselves to segments of the real estate market and their risks were high.

REITs function as funds which consolidate investments in property in different segments and geographies and allow the retail investor to truly encash the potential of the entire sector. It thus minimizes his risk. The investor has different yields and rewards to choose from. Recently SEBI has also issued clarifications on the functioning of Real Estate Mutual Funds. According to these guidelines the REMFs have to be close-ended and have to declare Net Asset Values every three months.

While REITs invest in physical properties and capitalise on regular rental returns, REMFs invest in the real estate stocks. So why are people investing in real estate at all? Where did all the hype about real estate growth come from? Explains Arun Vikram Goel, CEO of Dewan Housing Finance Venture Capital, “The hype around the real estate market comes primarily from speculative, extremely short-term investors. They have bought at launch prices and sold as the values of each subsequent release by the developer was raised and encashed their investment in the short term. These would have yielded very high gains. Nobody who has invested for the long term has contributed to the hype because chances are that they have not exited the market and their computed returns are notional. A long-term investor should not be looking at hyped gains.”

Explains another property investment advisor, “At the height of the boom, I had advised various investors to put their money into multiple projects and to recycle the investments for maximum returns. In fact, I managed portfolios of investors who had upto Rs 1 crore to invest by putting in the 10 per cent that was required to book a property and then to exit when the next installment was due. The gains so achieved were then reinvested in newer launches and the money was constantly increasing.”

But the current scenario is different. After 8-10 months of slow-down in transactions, developers are completing projects rather than launching numerous new ones. Even the rate of hike of value is steady and therefore the short-term speculator is kept at bay. Goel explains this phenomenon. “Immature markets tend to behave erratically. Initially rental markets are not stable and more users think of purchase rather than rentals. Once the supply comes in the rental markets pick up and those who do not want to occupy, lease out property. This hike in demand brings in the speculators and short-term buyers. Finally when there is a glut and capital values stop rising, the rentals will rise. But typically yields from residential real estate investments are only 5-6% in stable markets and 3-4% in unstable markets.”

So again why invest in real estate at all? Why not only in mutual funds if you are a retail investor? “To diversify your portfolio,” says Goel. And he has a simple mantra for the retail investor:

” Do not make investments on the basis of hype. Remember that in a market correction hype comes down and you get a realistic picture.

” It is wise to hold a diversified portfolio with real estate as one of the options.

” Time your entry correctly. The hype typically starts when the peak is reached. If you enter at the peak, you will not get the best rates and you may be part of the slide.

During investing for the long-term remember that returns average out. The property advisor, who does not wish to be named, maintains that normally even in weak market cycles property values double in five years. So if you are a 35+ age group, your property value will at least double every five years and you will never lose out. However, the rate of enhancement of the mutual fund investments is greater in the short term. Sanjay Mathur of Pearls Infrastructure says long-term real estate investments can be upto 200-300 per cent if you choose your investment destination correctly. If you invest in what is the periphery of the city today and hence cheaper, but if there is good economic activity there, the returns in the long term are definitely positive. Short-term returns are only high during speculative high-growth immature market cycles.

Goel agrees that the choice of investment destination is very important. “But real estate decisions are often very emotionally driven too. Aspirational considerations may drive the investors to look at property purchase than yield analysis alone. However, if the investor reads the future potential of markets correctly, he can get good returns. Goel sees younger investor opting more for systematic investments in mutual funds that is more speculative but has greater returns.

The REITs, which is expected to be functional by the next year, if the government gets its policy framework right, will attract an older investor who takes less risks, but opts for steady returns.

Source: Indian Real Estate (Vol.I)

Brixresearch.com

Surajkund - Lucrative Real Estate Options

Real estate boom in India has activated many dormant areas to become super- active. Surajkund is currently going through this phase of activation and is ready to cross the threshold in order to emerge as a real estate destination. This boom is further strengthened by the relaxation of Foreign Direct Investment (FDI) in the real estate and construction sector. Additionally, the retail segment has opened the doors for the commercial real estate sector of India. Faridabad is fast becoming the next hot destination for expanding developmental activities. The pace of real estate growth is expected to prosper well as more and more companies are now choosing to opt for Surajkund. The city has become a prominent investment destination due to its proximity to Delhi and also because of the rising values of the real estate in Gurgaon and Noida.

Faridabad has traditionally been an industrial city, with 300 large and 10,000 small scale units and the Haryana Government’s new Industrial Model Township. However, the industrial town of Faridabad is now noticing new residential developments, especially in Surajkund village that spans across 30 acres. Surajkund, already known for its international Mela, is now a residential delight for many. The Surajkund mela was launched in 1981 by the Haryana Tourism and is held in the month of February from 1st-15th every year. This craft Mela (fair) serves as a meeting ground for talented artists, painters, weavers, sculptors and craftsmen from all over India who display handicraft products in the typical setting of a rural Indian market place. The place is visited by number of domestic and International tourists and the foot-falls seems to be multiplying every year.

Green Environment

Away from the hectic and congested life, Surajkund offers an environment like no other place in Delhi. The place displays a sense of peace and traditional touch which is envied by every Delhiite. People are opting for Surajkund for its peaceful natural surroundings. Renowned developers are coming up with township projects in and around localities of Surajkund. The first township project near Surajkund is Charmwood Village by the Eros Group covered in the area of 65 acres. Omaxe, Ansals are also setting up their residential projects.

These attractive townships are sufficient to satisfy the needs of people. Bungalows, apartments and villas are available here with all the modern amenities. The rates of residential properties range between Rs 6,500-Rs 8,000 per sq ft. The rent is around Rs 20,000 for 2 BHK flat and varies on the bases of size and type. Ansal and Crown Plaza have lavishly designed malls catering to children’s entertainment and hospitality, along with other commercial and residential projects. Numbers of other residential projects are in pipeline and soon going to be launched.

Infrastructural developments

Social infrastructure is also developing at the fast pace to support the physical infrastructure in Surajkund. All the national and international based schools and educational institutes have come up in the periphery to benefit the students with a pollution free atmosphere. MNV public school, Delhi Public School and Manav Rachna School are to name a few. Transportation is also improving by and by with Delhi’s bus stand just 1 km from the Surajkund. Local rickshaws and autos are also available for intra-city connectivity.

The property price of Surajkund has increased three times in last couple of years. Planned infrastructure, township projects of big brands, proposed Metro in main Faridabad and rise in the prices of real estate property of other cities, involvement of Haryana government in the overall development of Surajkund make it a good choice for real estate investors.

Magicbricks provides you the best and latest Real Estate in India. To know about Surajkund Properties and Faridabad Real Estate & to buy India Properties visit Magicbricks.

Source: Times Property (31^st August’08)

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