To start any new venture or business, you always seek clarity in many forms. Despite regulations laid by RBI AMCs are yet to launch Real Estate schemes. Read this space to know what’s stopping AMC to launch such schemes.
To start any new venture or business, you always seek clarity in many forms. First you need clarity in your thoughts as to what you want to achieve by undertaking such an activity. Then follows the calculation part which helps in assessing the capital required to start the venture or the business. But when you learn that the rules and regulations framed by the Government for that particular venture or business are not very clear and there is a lot ambiguity surrounding the same, your hopes actually crash. Eventually you lose all your interests' in doing that business even though there are some rules in place for the same.
Similarly, the mutual fund industry is also in a dilemma of launching Real Estate mutual funds (REMF) despite regulations being in place for the same since 2008 by the Securities and Exchange Board of India. Let's find out what deters the mutual fund industry from launching such funds.
The SEBI in 2008 had laid down the following rules governing the REMF:
We believe that clarity of rules and regulations is vital for any new beginning. Real Estate sector in India is surrounded by a lot of ambiguity in the absence of a regulator. There is no control over prices of the real estates throughout the country, providing a thriving ground for malpractices and mis-selling. Under this situation, it is right that the mutual funds have delayed launching REMFs as the investors' hard-earned money would be at stake.
Also with respect to taxation of these schemes, the current regulation treating such funds as "debt funds" for taxation (as they will invest directly in real estate projects), has also precluded mutual fund houses from launching such scheme as such tax status fails to enthuse investors.
(PersonalFN is a Mumbai-based personal finance website.)
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