Sebi Rejects Hdfc Real Estate Mutual Fund Plan
The Securities and Exchange Board of India (Sebi) has shot down a proposal by the Housing Development Finance Corporation (HDFC) to float a real estate growth fund.
HDFC chairman Deepak S Parekh said that the proposed real estate growth fund, which had been drawn in similar lines to the property funds in the United States, was turned down by the securities watchdog on the ground that it might lead to speculation in the real estate market.
HDFC is readying itself to appeal to the securities watchdog to reconsider its decision on introduction of the novel fund.
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We will take up the matter with Sebi after the Budget, Parekh said.
Sebis recently-approved regulations, based on the Mutual Funds 2000 report, has, however, allowed real estate funds to be launched in India.
Turning down the proposal, Sebi has said that a real estate mutual fund will lead to speculation, thereby bringing down the real estate prices in the long run.
The capital markets watchdog has cited the examples of Tokyo and New York, where real estate prices witnessed recessionary trends.
The HDFC top brass is not satisfied with the explanation provided by Sebi and feels that the apprehensions were too far fetched.
The bearish trend in the real estate prices in New York and Tokyo cannot not be attributed to property funds, said HDFC managing director Deepak M Satwalekar.
HDFC had proposed a close-ended growth fund with a lock-in period of over 5 years which would be deployed in developmental activities (development of residential complexes, hotels, industrial areas and even retail businesses).
It had planned to seek the technical expertise of Colliers Jardine (India), a joint venture between Colliers Jardine Asia, HDFC, and Infrastructure Leasing and Finance Corporation for effectively managing the fund.
Parekh felt that although valuation of real estate properties cannot be undertaken on a daily basis like the net asset value for mutual funds, such exercises could be taken up in a half-yearly or yearly basis and would not pose any major problem.