New Sebi norms to hit real estate funds

Securities and Exchange Board of India’s (Sebi) norms for alternative investment funds (AIF) are likely to make it tough for real estate fund managers. These regulations will force them adopt new ways to woo investors. Sebi has recently notified AIF regulations for private equity, hedge funds, venture capital funds (VCF) and real estate funds, among others. These norms say the funds should not have more than 1,000 investors and the minimum investment amount should not be less than Rs 1 crore. Previously, the regulatory body had mandated a minimum investment of Rs 5 lakh for investors under the VCF guidelines. Realty fund managers are of the view that fund sizes will shrink due to the new norms and they will have to change their strategies. Real estate experts are of the view that real estate funds will be hit hard, given that many fund managers were raising smaller amounts like Rs 1 lakh to Rs 10 lakh from investors. The managing director of Ajay Piramal group-promoted Indiareit Fund Advisors is of the view that fund raising will become difficult and fund sizes will now shrink. There may not be many people with a kitty of Rs 1 crore to invest in funds, He said that though Indiareit is planning to raise two funds — one a Rs 500-crore slum redevelopment fund and the other, a $150-200-million (Rs 840-1,120 crore) rental yield fund, the new guidelines do not apply to these funds as they have already applied under the earlier VCF guidelines. By the new norms, funds already registered under VCF norms, would continue to be governed by them, including raising commitment up to its targeted corpus.