Invest In India » Capital Appreciation

Real Estate Investments Made Simple:

Malvika — Fri, 25 Mar 2011 05:52:30 +0000

Gold and Real estate are very traditional investment avenues. Gold has evolved from its traditional investing and found its place in the modern sophisticated investment world via Gold ETFs. Similarly Real estate is also emerging as an investor friendly avenue with less hassle via PMS route or private equity route. Have you ever thought of investing in real estate will one day be as simple as investing in mutual funds? If no please read on….

Real Estate as an Investment:

Buying a dream house or flat to reside ourselves is basically not a real estate investment. Buying real estate with a view to generate income and capital appreciation is considered as Real Estate investments. Real Estate investments can be further classified into residential, farm house, commercial, retail, leisure. Leisure is a relaxation place where one can spend their free time or vacation.

Depends upon his/her risk tolerance and time horizon one can invest in real estate at different risk levels. It can be at the time of converting a rural land to urban land, or at the time of building development stage or in already developed city area.

Real Estate and Risk:

Most often investors assume real estate prices will not fall down and they only go up year after year. It is not so. During the mid 2009 some of the real estate investments were quoting below 30% to 40% from their 2007 prices. Real Estate investments are also prone for price fluctuations.

Real estate Vs Stock market:

Real Estate is a complex and complicated investment when compared to stock market.

Non-transparent: There is no transparency in the price. It is not easy for a buyer or seller of real estate to identify the last transacted price in the same locality. There is no price discovery mechanism.

Illiquid Asset: Selling a real estate is a time consuming process. It is not liquidable easily. There is no organized market for the buyers and sellers to meet.

Impact Cost: Stamp duty and registration charges are really very heavy when compared to the other investment products.

No Regulator: There is no regulator for the real estate participants and intermediaries. Anyone can become a builder. Technical qualification is not mandatory. Also anyone can become a real estate intermediary or advisor. There is no certification or training to be completed before practicing. As there is no qualification requirement for participants as well as the intermediaries, it is very difficult to see best business practices.

Real Estate hassles:

The other hassles with reference to real estate investment are documentation, maintaining the asset without any encumbrances, and genuineness of the title deed.

There are some practical problems with diversification. Normally an investor invests in a real estate in his own locality. It is very rare to find someone in Chennai investing in the real estate properties located at Mumbai, Delhi or Kolkata. Affordability also limits diversification. An investor may not be able to diversify his investments across various cities with Rs.25 lacs or 50 lacs.

It may not be possible for an individual investor to buy a land and develop a viable project in that land and sell it in the market. Managing the project development need some kind of expertise. Even if an individual is able to do it, he will be doing it in his limited ways and means.

Is there a solution for this? Of late yes.

There are some collective investment vehicles. These investment vehicles will be promoted by an investment management company. The investment management companies collect money from investors. Being professionals, they will identify good projects and do joint venture with the project developers. They will be able to diversify across various cities as well as various types of real estate investments such as housing, commercial, hospitality and the like. These investment management companies charge a reasonable management fees.

At times they collect money via PMS route and at times via private equity route. The minimum investment ranges from 10 lacs to 25 lacs. This amount needs to be invested over a period of 3 years. That is they will collect money from investors in 4 or 5 installments. After 3^rd year whenever they exit from a project they will repay the principal employed in the project as well as the profit generated out of that project. End of 6^th year or 7^th year, the investment management company will exit from all the projects.

The advantages of this collective investment vehicle are

One can invest into real estate without any hassles. All the hassles will be managed by the professional investment management companies.
One can invest in various real estate projects at a time.
One can geographically diversify his investments across India.
One will be able to apportion his total investment into small sums in large projects like township development, Technology Park, industrial estate, health city…
Cost advantage because of economies of large scale operation

This is really an investor friendly investment vehicle. Apart from the regular stocks, mutual funds and fixed deposit investments investors can consider investing in these real estate products also. This will give better diversification to your overall portfolio. Also Investors need to be careful in choosing such investment options. Background of the investment management company and their transparency levels are more important. Investors can seek the advice of the professional financial planners before investing.

This investment vehicle is in its primitive form only. It still needs to go a long way. As of now there are only a very few companies in India which specializes in promoting collective real estate investment products. But in a few years time these kinds of products will be available from various investment management companies and in different varieties like our present mutual fund schemes.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

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Fidelity MF launches equity fund, plans intl funds in India

Tushar Mathur — Thu, 26 Nov 2009 11:20:00 +0000

Fidelity Mutual Fund today announced the launch of its Fidelity India Value Fund, an open-ended, diversified equity fund.

The company is also looking at launching its international funds in the Indian market, a top company official said here.

“With the launch of the India Value Fund, we are broadening our offering of equity funds. Value investing has at its heart a bottom-up stock picking approach given its focus on finding undervalued stocks,” Fidelity International’s Managing Director and Country Head, Ashu Suyash, told reporters here today.

The fund will invest in Indian and international equities with a higher focus on undervalued securities to deliver long-term capital appreciation.

“We are also looking at launching international funds in the Indian markets. We still have to go through necessary approval process before their launch here,” Suyash said.

The Fidelity India Value Fund’s new fund offer (NFO) will remain open from November 16 – December 15, 2009.

“Value investing has a real role to play even in a growth economy. The fact is that there is little or no correlation between whether a stock is undervalued and the GDP growth of that economy. If you look at the last ten years, in which India saw strong GDP growth, you would still find that value outperformed growth by two times,” Fidelity India Value Fund’s Fund Manager, Nitin Bajaj, said.

“As long as markets are driven by sentiment and emotions like fear and greed, we will see market inefficiencies and momentum which will give rise to valuation anomalies. It is these undervalued stocks that I’m looking to uncover,” Bajaj said.

Benchmarked to the BSE 200, the Fidelity India Value Fund will have a normal allocation to equity and equity-related securities within a range of 80 per cent to 100 per cent of net assets. The normal allocation to other instruments, including cash, debt and domestic ETFs will be within a range of 0-20 per cent.

The Fund may also invest up to 10 per cent of net assets of the fund in foreign securities including overseas ETFs.

Fidelity International’s Indian asset management company has total assets under management of over Rs 9,000-crore and more than 16-lakh customer accounts, Fidelity offers Indian investors investment options through its five equity funds and five fixed income, hybrid funds.

©2009 Copyright by Invest In India

Sahara Star Value Fund reopens for sale

Tushar Mathur — Mon, 21 Sep 2009 12:12:00 +0000

Sahara Mutual Fund has announced the re-opening of its equity scheme “Sahara Star Value Fund” with effect from September 18, 2009. As per the provisons of the scheme, units will be offered for purchase and redemptions on all business days on an ongoing basis. The scheme debuted at Rs 10.1468 per unit as against a face value of Rs 10 per unit on September 17, 2009.

Announcing this, Mr. Naresh Kumar Garg, Chief Executive Officer, Sahara MF mentioned that the equity markets worldwide have started appreciating post early signs of economic revival. The Indian markets to is reflecting the early signs of good economic growth going forward backed by stronger government policies and good industrial production. While stock across sectors have already posted handsome gains, there are still many quality stocks which are attractive picks. Sahara Star Value Fund, which would invest in such quality stocks which hold value on relative parameters. The fund is positioned as a preferred vehicle for investors to participate in the perceived long term value creation.

Sahara Star Value Fund, is an open ended growth scheme with the objective to provide long term capital appreciation by investing predominantly in equity and equity related instruments of select companies based on value parameters.

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Monthly Income Plan (MIP) – A balanced investment approach in volatile markets

Tushar Mathur — Mon, 27 Apr 2009 12:47:20 +0000

MIP is a debt oriented fund having a mandate of investing majority into debt instruments (75-85%) and a small part of its assets (generally 15-25%) into equities. It thus combines stability of debt with the power of equities. As the name suggests, MIP is intended to offer monthly income, however it is not mandatory to pay monthly dividends as the same will depend on the availability of distributable surplus in the scheme. Besides monthly option, MIP’s also has quarterly, half yearly, annual dividend options. It also has growth option wherein the investors don’t get dividend payouts, but will get returns in the form of capital appreciation.

MIP should not be confused with balanced fund, because the equity exposure in balanced fund is more than 65% while that in MIP is generally between 15-25%.

DSP Black Rock Savings Plus – Aggressive plan

The fund has 17% exposure in equity, 68% exposure in debt and 15% exposure in cash and cash equivalents. Under equity the fund has high exposure in large caps and some exposure in Nifty. The debt portion is conservatively managed with the fund maintaining a high allocation to floating rate bonds and bonds in the shorter end of the curve.

HDFC MIP – LTP

The fund has 22% exposure in equity, 65% exposure in debt and 13% exposure in cash and cash equivalents. Under equity the fund has a mix of large and mid caps with more focus on mid caps. The debt portion is passively managed through corporate bonds.

DSP Black Rock Savings Plus – Moderate plan

The fund has 11% exposure in equity, 75% exposure in debt and 14% exposure in cash and cash equivalents. Under equity the fund has high exposure in large caps and some exposure in Nifty. The debt portion is conservatively managed with the fund maintaining a high allocation to floating rate bonds and bonds in the shorter end of the curve.

ICICI Prudential MIP

The fund has 14% exposure in equity, 64% exposure in debt and 22% exposure in cash and cash equivalents. Under equity the fund has high exposure in large and some exposure in mid and small caps. The debt portion is conservatively managed through exposure in g-secs, PSU bonds and corporate bonds.

Performance comparison as on 31st March 2009

Scheme Name
NAV

1
Month

3
Months

6
Months

1
Year

3
Years

DSP BlackRock Savings Manager Fund -
Aggressive – Growth
15.3954

15.82

5.94

1.45

4.23

6.63

DSP BlackRock Savings Manager Fund – Moderate
- Growth
16.7933

11.15

5.18

2.45

4.12

5.74

HDFC MIP – LTP – Growth
16.0084

36.58

3.58

3.46

-0.74

5.55

ICICI Prudential MIP – Cumulative
20.6251

21.95

-10.35

8.15

0.82

5.16

Indices

Crisil MIP Blended Index
13.11

0.65

5.99

0.50

5.63

The returns are simple annualized for one year and less than one year and compounded annualized for more than one year. Source: MFI Explorer, ICRA

©2009 Copyright by Invest In India

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UTI Mutual Fund launches UTI-Wealth Builder Fund-Series II

Tushar Mathur — Thu, 23 Oct 2008 07:37:00 +0000
UTI Mutual Fund announces the launch of a unique scheme “UTI Wealth Builder Fund-Series II” which combines the benefits of both equity and gold. The New Fund Offer opens on October 21, 2008 and closes on November 19, 2008.

The scheme will re-open for purchase and redemption not later than 30 days from the closure of the NFO period. (View - New Fund Offers open NOW)

UTI Wealth Builder Fund-Series II is an open ended equity oriented scheme. The investment objective of the Fund is to achieve long-term capital appreciation by investing predominantly in a diversified portfolio of equity and equity related instruments alongwith investments in Gold ETFs and Debt and Money Market instruments.

Jaideep Bhattacharya, Chief Marketing Officer, UTI AMC said, “UTI Wealth Builder Fund-Series II is the First of its Kind in the mutual fund industry to offer an asset allocation which combines traditional as well as non traditional asset class i.e. Equity and Gold. It is important to have an alternative asset in one’s portfolio and to build a portfolio around assets that have low correlation. Gold has proved to be “counter cyclical” or low correlated asset class as compared to equity investments and has generally been considered as a safe haven during times of economic upheavals and volatile equity markets."

“Also first time Investors will have the convenience of investing through SIP that will have exposure to Gold ETF” he added.

Harsha Upadhyaya, Fund Manager of the scheme said, “The scheme aims to build and maintain a diversified portfolio of equity stocks that has potential to appreciate in the long run. The scheme will take exposure across capitalisations with a tilt towards large caps and will also use derivatives to hedge and manage volatility. The investment in Gold ETFs will diversify portfolio risk and reduce overall volatility of returns.”

Salient Features of UTI- Wealth Builder Fund-Series II

* Eligible Investors: The plan is open to resident individuals, institutions as well as to NRIs and FIIs.
* New Fund Offer Price: During the NFO, the units will be sold at face value of Rs.10/- plus applicable load.
* Redemption: The scheme will offer redemption of units at NAV based prices on every business day on an on-going basis not later than 30 days from the date of closure of the NFO period.
* Plans: Retail and Institutional Plan
* Options: Growth and Dividend option with payout and reinvestment facilities
* Minimum Application Amount: Retail Plan: Rs.5000/- and in multiples of Rs.1/- thereafter, Institutional Plan: Rs.1 crore and in multiples of Rs.1/- thereafter
* Benchmark Index: BSE 100 for Equity part of the portfolio, CRISIL Bond Fund Index for that part of the portfolio relating to investments in debt and money market instruments and the price of Gold as per SEBI regulations for Gold ETFs
* Waiver of Load for Direct Application: No entry load shall be charged for direct applications received by the AMC
* Load Structure during the NFO period.

©2009 Copyright by Invest In India

Picking a fund

Tushar Mathur — Thu, 23 Oct 2008 07:33:00 +0000
The fund chosen should also meet the investor's risk tolerance level.

The Indian mutual fund industry is growing at a phenomenal rate, with the assets under management increasing by 376.11% in the past 5 years. Besides, the investors are spoilt for choice as the market has moved from traditional equity and debt schemes to specialised products like fund of funds, arbitrage funds and asset allocation funds. This variety often confuses the people as they find it difficult to select a fund that suits their needs. To help pick the right fund, consider the following three parameters:

Investment objective and risk profile: The investment objective of the fund must coincide with that of the investors and includes tax planning, regular income, high returns and long-term planning like children's education. While equity funds are more tax efficient compared with debt funds, short-term debt funds aim at regular income, whereas closed-ended equity funds aim at long-term capital appreciation.

The fund chosen should also meet the investor's risk tolerance level. The Association of Mutual Funds in India defines three tolerance levels: low risk or cautious, moderate risk or cautiously aggressive and high risk or aggressive. Low-risk investors should consider debt funds, which invest in government securities or highrated debt papers. Moderate-risk investors should go for index funds, balanced funds and asset allocation funds, while the high-risk investors should look at equity funds, offshore funds and mid-cap funds.

Fund performance and management: Though a fund's past performance does not define its future, it's important to study it with respect to its benchmark or similar funds. Fund performance should be compared with the same category of funds. So the performance of a mid-cap fund cannot be compared with that of a large-cap fund as mid-cap stocks are more volatile. The past performance also helps assess the quality of fund management and the skills of the fund manager. His stock picking ability and market timing can be judged by comparing the fund's performance with its benchmark. If it does better than its benchmark, it's an out-performer, and if it yields less than the benchmark it's an under performer.

Fund costs and loads: The operating costs of running a fund include marketing and selling expenses, audit fees, custodian fees, etc. These expenses can be gauged from the expense ratio, which is reported in the fund's annual report. This should be compared with similar funds; a high expense ratio impacts the long term investors due to the effect of compounding (see “Your Fund's Annual Cost”)

Other important factors are the entry and exit loads, which are charged to recover the commissions of agents and distributors. The loads are deducted from the NAV of the scheme, which reduces the number of units for the investor. (In January 2008, Sebi scrapped the entry loads for those investing directly through fund houses, but not all fund houses offer this). The investor should compare the loads among similar funds. Due to the compounding effect, funds with relatively lower or no entry loads yield higher returns in the long run.
©2009 Copyright by Invest In India

HDFC Infrastructure Fund

Tushar Mathur — Wed, 20 Feb 2008 06:15:17 +0000

HDFC Mutual Fund has launched a new scheme, designed to cater to your long-term equity investment requirement. HDFC Infrastructure Fund*, a close-ended Equity Scheme with automatic conversion into an open-ended scheme upon maturity after 3 years. The investment objective of the scheme is to seek long-term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in or expected to benefit from the growth and development of infrastructure. For the sake of diversification, I feel this could be an important fund in your long term portfolio.

New Fund Offer Price : Rs. 10/- per unit.

The Scheme offers investors two Options :

Growth Option

Dividend Option (with payout and re-investment facility) Dividend re-investment facility will be available only after the Scheme is converted into an open-ended scheme upon maturity)

Investment Objective

To seek long-term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in or expected to benefit from the growth and development of infrastructure.

Benchmark Index

The Benchmark Index for the Scheme would be S&P CNX 500. The Trustee reserve the right to change the benchmark for evaluation of performance of the Scheme from time to time in conformity with the investment objectives and appropriateness of the benchmark subject to SEBI Regulations, and other prevailing guidelines, if any.

Investment Strategy

he Scheme shall invest predominantly in equity and equity related securities of companies engaged in or expected to benefit from the growth and development of infrastructure. The Scheme shall invest in the following indicative list of sectors/industries:

Airports

Banking and Financial Services

Cement and Cement Products

Construction and related industries

Electrical and Electronic Components

Energy

Engineering

Metals/Mining/Minerals

Housing and related industries

Industrial Capital Goods

Industrial Products

Oil & Gas and allied industries

Petroleum and related industries

Ports

Power and Power Equipment

Telecom

Urban Infrastructure including Transportation, Water, etc.

For more information on this fund you can download the offer document here at: HDFC Infrastructure Fund

©2009 Copyright by Invest In India

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Open-Ended Infra Fund

Scheme Name	NAV	1 Month	3 Months	6 Months	1 Year	3 Years
DSP BlackRock Savings Manager Fund - Aggressive – Growth	15.3954	15.82	5.94	1.45	4.23	6.63
DSP BlackRock Savings Manager Fund – Moderate - Growth	16.7933	11.15	5.18	2.45	4.12	5.74
HDFC MIP – LTP – Growth	16.0084	36.58	3.58	3.46	-0.74	5.55
ICICI Prudential MIP – Cumulative	20.6251	21.95	-10.35	8.15	0.82	5.16
Indices
Crisil MIP Blended Index		13.11	0.65	5.99	0.50	5.63