A Brief Note on Real Estate Mutual Funds

Real estate mutual funds are sectoral funds that primarily invest in securities provided by companies that invest in real estate projects. 

It is possible for an investor to invest in a real estate mutual fund with just Rs 1,000, thus providing an opportunity to gain from the real estate market growth. As the share prices of the allotted assets rise, the fund’s Net Asset Value (NAV) also experiences a surge.

An investor can suitably participate in the real estate market minus the liability of buying a physical property. Such mutual funds also provide access to diverse properties, which include commercial, residential, rental, and hospitality.

However, it is important to note that such funds will likely face sectoral risks and could take five to six years to provide modest returns. While offering flexibility in investments via the Systematic Investment Plan (SIP), it is possible for an investor to invest small sums of money every month, depending on their investment capacity. 

Real estate mutual funds can be redeemed in just a day, being highly liquid. Besides, considering real estate prices continually witness an uptick, funds invested in them are likely to beat inflation in the long run. Real estate funds are ideal for investors with an investment horizon of at least five to six years.  

An economic slowdown or sudden change in government policies could have an impact on returns, which are likely to become sluggish due to limited buyers and investments. Usually, the expense ratio is similar to other mutual funds, and so is the taxation framework.

Real estate mutual funds are easily accessible, apart from the ease of buying and redeeming funds through mobile apps and websites of the Asset Management Companies (AMCs), providing an opportunity for investors to gain from the real estate market.

An investor can consider investing in such mutual funds for diversification purposes depending on their risk appetite.

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