First realty fund approved

The Securities and Exchange Board of India (Sebi) approved the country's first venture capital fund, the HDFC Property Fund, in real estate.

Thus, the Sebi has not allowed a property fund to come up as a mutual fund, open to retail investors, but as a venture capital fund. The implication of the move is only high net worth individuals and corporates can subscribe to the corpus of this fund.

In October 2004, the HDFC board had approved the corporation's entry into the business of real estate venture funds after Sebi amended the Venture Fund Act, opening the path for the housing major to invest in the segment.

The HDFC Property Fund will initially target domestic investors. HDFC proposes to set up a fund at a later date for overseas investors.

Balaji Rao, a Mumbai-based real estate consultant said, "It will definitely provide a boost to the real estate market as more money can flow into it."

He said this would also signal the introduction of structured products in a market which was largely unorganised.

Incidentally, Sebi has not yet approved opening the real estate market to mutual funds. However, according to Industry circles, venture funds are expected to pave the way for real estate mutual funds, and housing can become an investment not only for high net worth individuals but also for small investors. This would mean a channeling of large investments into real estate.