Real Estate Funds

Everyone who is earning thinks of using some part of his money for some kind of investment that will yield him some profit in the future. Well, there are a variety of investments that one can opt from, like property, gold, etc. Property is always a great deal to invest in. But the thing with property is it’s a high investment, and not all people can afford it, so the role of Real Estate Mutual Funds comes in. Real Estate Mutual funds help small shopkeepers to invest in properties without making a hole in their pocket.

 What is a Real Estate Fund?

A Real Estate mutual fund (REMF) is a type of mutual fund that invests in Real Estate company stocks. A significant portion of this capital is invested in commercial and corporate properties, as well as residential and agricultural property. Real Estate Funds are sector funds that invest in the securities of Real Estate companies. To put it another way, these funds lend financing to a Real Estate company so that it can build a property. The fund earns significant returns if the sector increases.

 What do you mean by Mutual Funds?

A mutual fund is an organization that collects money from several individuals and invests it in stocks, bonds, and other assets. The portfolio refers to the fund’s total holdings of stocks, bonds, and other assets. Shares, which reflect a portion of the fund’s holdings, are owned by each investor. Here are a few examples: Growth funds invest in stocks that don’t pay a monthly dividend but have the potential to outperform the market. Dividend-paying equities are the focus of income funds. Index funds follow a certain market index.

 What are the advantages of Real Estate Mutual Funds?

Here are a few reasons why investing in Real Estate mutual funds may be beneficial:-

Investing Flexibility:

They provide investors with a lot of freedom because they can invest based on their financial goals and the amount of money they have access to.

 Purchasing Property as an Alternative:

Real Estate mutual funds provide a low-cost way for small investors to buy an investment property while also reducing their involvement in the fund’s management.

 Portfolio Diversification:

These funds enable investors with a modest amount of capital to invest in concentrated or diversified Real Estate projects with low initial capital requirements. The investment portfolio includes residential, commercial, and rental projects.

 High Liquidity: 

Real Estate investment has low liquidity because reselling a property can be difficult. When the market is up, however, investing in Real Estate mutual funds can help you receive larger returns and allow you to exit your holdings whenever you want. 

Portfolio Consistency:

This fund helps to balance the portfolio’s high-risk investments. Although Real Estate prices change from time to time, this has little impact on Real Estate funds.

 Defend Against Inflation:

Property and rent prices rise during inflation, which can lead to an increase in the value of the Real Estate, which can raise the value of Real Estate mutual fund units.

 What are the different types of Real Estate Funds in India?

 There are many types of Real Estate Funds In India- 

Mutual Fund for Real Estate

Like other mutual funds, Real Estate-focused mutual funds are professionally managed investments that invest in a range of asset classes to build a diversified portfolio. Most Real Estate mutual funds invest in Real Estate company stocks and bonds (including REITs) as well as direct property investments. Smaller investors or those who desire a diversified and professionally managed passive income with a high level of liquidity will find mutual funds appealing to private.

 Private Equity Real Estate Fund

Real Estate private equity funds are similar to all other private equity funds in concept, with the distinction that Real Estate private equity funds invest exclusively in Real Estate. Real Estate private equity (PE) businesses act as “General Partners” (“GPs”), raising capital from private investors known as Limited Partners (“LPs”) and investing it in Real Estate. The general partner is in charge of selecting and managing attractive investments in order to give a return to the limited partners. PE funds’ limited partners are typically high-net-worth individuals, families, pension funds, insurance firms, university endowments, or corporations who act as primarily passive investors in the fund.

 Debt Fund for Real Estate

Real Estate debt funds, like private equity firms, raise money from major investors to invest in Real Estate assets. Loans funds, unlike private equity firms, often invest in senior or mezzanine debt secured by Real Estate assets. One of the most significant distinctions between equity and debt funds is the stability of cash flow in debt funds, as well as the security given by the collateral.

 Real Estate Investment Fund

A Real Estate investment trust, or “REIT,” is a legal company that invests directly in Real Estate or Real Estate-backed mortgages. Investors can buy REIT shares to participate in the income provided by the property as well as the appreciation of the REIT’s portfolio of properties. 

What is the difference between Real Estate vs Mutual Funds?

 There are many  differences between Real Estate and Mutual Funds :

Liquidity: 

Mutual Funds are more liquid in nature than Real Estate, which means they can easily be converted into cash in a lesser time with fewer efforts. Real Estate Funds take time to be converted into cash, and it is a little cumbersome process to do it.

Compounding’s Power: 

Over time, mutual fund investments produce high returns. This is due to the compounding power of your money, which does not apply to Real Estate. For example, if you invest Rs 2,00,000 in mutual funds that pay 14.9 percent p.a., you will get a 14.9 percent p.a. return. The profits generated over a 20-year period will total Rs 32.17 lakh at maturity. Invest in mutual funds and take advantage of compounding to get returns that outperform inflation.

 Investing Simplicity: 

Real estate investing entails a great deal of paperwork and procedures. In addition, investors must pay CERSAI fees, stamp duty, and registration fees, among other things. For investors, it can be a laborious and time-consuming process. Mutual fund investment, on the other hand, is a simple procedure. Starting to invest takes only a few minutes. All you have to do is invest through a SIP post, which will debit the cash from your bank account automatically on a monthly basis. There are no additional costs associated with these investments.

.Returns:

 Mutual fund investments provide higher returns than Real Estate Funds investments. While real estate can yield returns ranging from 7% to 11% per year, mutual funds can yield returns ranging from 14 per cent to 19 per cent per year, depending on the type of investment. This enables investors to earn high returns that are inflation-adjusted and accumulate wealth.

Conclusion

Purchasing a property is anything but a simple errand and is most certainly an expensive undertaking. While purchasing land bank credits or contributing through REITs is the ideal decision, India offers a few venture choices for land. Following are a portion of the potential outcomes: Mutual Savings Banks, Banking Sector, Savings and Credit Associations, and Life Insurance Banks are all primary suppliers. Real Estate funds can provide the advantages of real estate investing without the risks of direct ownership. In general, these funds can offer higher rates of return while posing a smaller risk than individual real estate investments.