What are the major differences between Real Estate Venture Funds, Real Estate Investment Trusts (REIT), and Real Estate Mutual Funds?

Real estate investment from an individual’s point of view is a large investment wherein large amount of money (in Lacs, or in Crores) is required to purchase either a commercial or residential property. The money invested sits there in the asset and over a period of time capital gains are accrued by the investor. The capital gains thus accrued depend on supply demand equilibrium prevailing in the market. If property is available for use, the investor can use it for own purpose or rent it out to earn rental income. Thereby, investment in real estate can fetch twofold returns namely rental yields and capital gains.

However, only investors with deep pockets can afford to invest in real estate asset class. What about retail investors with small amount of money? Can’t they invest in real estate just like they invest in stock markets? Yes, they can by way of participating in either Real Estate Investment Trusts (REIT) or Real Estate Mutual Funds (REMF).  Read more about Real Estate Investment Trust.

Find below the major instruments that can be used by investors to invest in real estate without actually buying a Property:

• Real Estate Venture Funds

Investment Audience: HNIs, institutional investors and global investors (since minimum investment required by each investor is worth millions, retail investors are outside the purview)

Investment Target: Real Estate Assets (Projects/Ventures), securities (of listed/unlisted entities) or both.

Investment Returns: 25-30% (on an average)

Leading Entities: Indian players (such as Kotak, HDFC, ICICI, Kshitij, DHFL) and international players (such as Actis, Morgan Stanley, Maple Tree, Sun Apollo, Lehman Brothers etc).

• Real Estate Investment Trusts REITs

Overview: Close ended investment vehicles that invest only in real estate assets (through property or mortgages). It is floated as a company with issued share capital. ( REITs are structured as corporations with issued share capital)

Investment Audience: Retail as well other institutional investors

Investment Target: Real Estate assets only (either through mortgages or property). It invests primarily in ready to use, constructed properties only.

Investment Returns: Returns in the range of 10-15% annually from rental income of property owned by REIT.

• Real Estate Mutual Funds REMFs

Overview: Close ended funds that invests primarily in securities issued by real estate companies (and to some extent assets as well).

Investment Audience: Retail as well other institutional investors

Investment Target: As per SEBI guidelines, at least 75% of the total assets should be invested in real estate or related securities. Further, a mandatory 35% of assets within the stipulated 75% have to be invested in completed real estate assets. The remaining 25% can be invested in securities related or unrelated to the real estate sector.

Investment Returns: Expected returns in the range of 35% (largely capital gains through investment in securities or sale of assets at time of closure).

What is a completion certificate and how to apply for it?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

In our last post, we discussed various approvals that are needed to construct a house. We also discussed that no matter if you are constructing your own house or buying it from the real estate developer; you still need to get approvals from relevant authorities within your city.

An important approval (or document) among all the approvals is completion certificate (CC). As the name suggests, this certificate is granted after the completion of the construction of your house or a group housing society. The certificate is issued when the property is ready to be moved in. A completion certificate is issued by the local development authority/Municipal Corporation certifying that:

1. All necessary works have been completed according to the design plan and other directions, and
2. The property is fit for moving in.
3. The construction is carried out as per the building codes set up by the development authority.
4. The building adheres to the earthquake guidelines, fire fighting guidelines, and do not breach any safety parameters.
5. The interior work also has been completed as per the approved layout map. 
6. The development authority has no role in the choice of interior fixtures such as bath fittings, electrical fittings. Fans, cooling systems, ventilation systems such as an exhaust fan, airconditioning, appliances, furniture, electronic items, kitchen fittings, are decided by the homeowner and the development authority has no role in that.

Therefore, it is your duty to apply for a completion certificate when the house you are constructing is ready to be moved in. Or you should ask your developer to get the completion certificate in case you are buying the property in a group housing society such as a high rise or low rise apartment complex.

Find below the procedure for obtaining the completion certificate:

What is the completion certificate and how to obtain it from Green Realtech Projects Pvt. Ltd

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