Limited supply, low returns may restrict inflows into REITs

THE DECISION OF the Securities and Exchange Board of India (Sebi) to reclassify real estate investment trusts (REITs) as equity-related instruments with effect from January 1 is seen as an enabler for mutual funds, but experts said limited supply and low returns may come in the way of getting meaningful inflows into this asset class.

- ANANYA GROVER

Noting that it is at a very early stage, Madhu Nair, CEO of Union Mutual Fund, said the move is big as it gives fund houses more liberty in terms of mandates that they can invest in another asset class.

He said: “It’ll take time for flows to come as we will have to test the markets, but higher demand will lead to increased volatility and lowering of yields. Having said that, given the asset class’ current properties of lower volatility and fixed income-like predictability, early adopters will be schemes like hybrid, multi assets, and even SIFs.”

“We will evaluate it as an independent asset class and expect more products to be developed,” Nair said.