Challenges for Indian Mutual Fund Industry in India

The Indian mutual fund industry needs to widen its range of products with affordable and competitive schemes to tap the semi-urban and rural markets in order to attract more investors. The industry has still not been able to penetrate among retail investors and it needs to share best practices from mature markets like US and Britain where mutual funds are the most preferred form of investment. Mutual fund companies need to introduce products for the semi-urban and rural markets that are affordable and yet competitive against low-risk assured returns of government sponsored saving schemes such as post office saving deposits. The industry is also overwhelmed by scarce technological infrastructure and needs to collaborate with other sectors of the economy such as banking and telecommunications. Mutual fund companies are also required take advantage of the growing opportunity in the commodities market. Further, the mutual funds could also enable the small investors to participate in the real estate boom through real estate mutual funds. With a strong regulatory framework, clear guidelines and the talent to back it up, the Indian mutual fund industry is in a position to cater to the new breed of investors who are keen to diversify their risks. The real estate sector and the road ahead Real Estate Mutual Funds (’REMFs’) The SEBI Board has now approved the guidelines for the much awaited Real Estate Mutual Funds. “Real Estate Mutual Fund Scheme” is defined to mean a scheme of a mutual fund which has investment objective to invest directly or indirectly in real estate property. Governing Law It is proposed that REMFs will be governed by the provisions and guidelines issued under SEBI (Mutual Funds) Regulations. REMFs, shall initially, be close ended. The units of REMFs shall be compulsorily listed on the Stock Exchanges and Net Asset Value (NAV) of the scheme shall be declared daily. Custodian The REMFs would be required to appoint a Custodian who has been granted a Certificate of Registration to carry on the business of Custodian of securities by the SEBI Board. The custodian would safe keep the title of real estate properties held by the REMFs. Investment Criterion: It is proposed that REMFs could invest in the following: - * Directly in real estate properties within India; * Mortgage (housing lease) backed securities; * Equity shares / Bonds / Debentures of listed / unlisted companies which deal in properties and also undertake property development; and in * Other securities