The mutual fund industry expects lower volatility and better returns for investors with the capital market regulator Sebi proposing to re-classify Real Estate Investment Trusts (REITs) as “equity”, effectively allowing investments by mutual funds into this asset class.
Once the proposal is firmed up, investors will be able to tap into REITs indirectly through mutual funds, with the asset class delivering 6-7 per cent yield, according to an Anarock-Credai Report.
“This new initiative from the regulator (Sebi) is industry positive and will give mutual funds the flexibility of investing into REITs while also generating better returns for the benefit of investors. It will also minimise the risk of volatility in making investments into REITs through mutual funds,” Ravi Kumar Jha, managing director and CEO, LIC Mutual Fund, told The Telegraph on Monday.
“The reclassification of REITs as equity for mutual fund investments is also a timely step that will enhance diversification opportunities and support the growth of real estate as an investible asset class,” said Venkat Chalasani, chief executive of mutual fund industry body AMFI.
“By enabling this, Sebi has paved way for widening investor participation in these instruments and also improving liquidity,” said Indian REITs Association.
“At Embassy REIT, we see this as a catalyst to broaden investor participation, enhance liquidity, enable future index inclusion and further strengthen REITs as a mainstream asset class,” said Amit Shetty, CEO Embassy REIT.
At present total assets under management of REITs have crossed $2 billion and the figure is expected to reach $4 billion by 2030.