If numbers are anything to go by, there has been a marked rise in mutual fund (MF) investments in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in the past few years.
In fact, the numbers have improved post the Covid-19 pandemic. These were the findings of a data compiled by a private agency.
The value of holdings that stood at Rs 734 crore by March 31, 2020, jumped to Rs 5,200 crore up to March 31, 2023.
In a span of three years, the number of asset management companies (AMCs) or fund houses investing in REITs and InvITs has grown to 18 in 2023 from seven in 2020.
The MF investments in REITs and InvITs is about 0.13% of the Rs 40 trillion of total assets under management (AUM). However, the two asset classes are significantly gaining ground in the country.
Experts are of the opinion that the current rise in MF investments remains parallel to the improvement in financial metrics of commercial real estate as well as the push provided by the government to the infrastructure segment.
As per the markets regulator Securities Exchange Board of India (SEBI), MF schemes, this includes equity, debt, and hybrid funds, can invest about 10% of their portfolios in REITs and InvITs.
The National Stock Exchange (NSE) Indices launched the country’s maiden REITs and InvITs Index recently. This move paved the way for MFs to introduce passive REIT and InvIT funds.
REITs are framed like MFs and involve a firm owning a land parcel and setting up a trust structure. Multiple properties can be leased and operated via REITs.
REITs are similar on the lines of MFs considering they are pooled investments. However, the key difference is that MFs invest in various asset classes such as equity, debt, and gold, etc, while REITs are listed instruments that invest in just real estate.
Similarly, InvITs are professionally-managed investment trusts which are more infrastructure related. InvITs are also similar in functions to mutual funds, they provide part ownership to an investor in infrastructure projects. For instance, this may be roads and highways, power distribution networks, telecom, etc.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.