Best Real Estate Mutual Funds in India: A Comprehensive Guide
Many consider real estates to be one of the highest yielding investments, but direct investment in real estate requires significant capital and investment skills. To bypass the hassle of managing physical properties, a perfect alternative is investing in real estate mutual funds in India. For people looking to invest in the growth of real estates without getting too hands on, this is the ideal option.
Let’s learn about the top performers of the sector. In India, mutual fund companies offer the opportunity to invest in the real estate sector through a singular diversified portfolio which consists of REITs, Property Developers, and Infrastructure Companies.
1. What are Real Estate Mutual Funds?
This information should have been discussed at the onset but let us clarify real estate mutual funds before the best real estate mutual funds India. A mutual fund that focuses specifically on real estate, typically investing in publicly traded companies which operate in the sectors of real estate construction, development, and management of property is what real estate mutual funds are. A popular option to invest in real estate mutual fund India is by investing in REITs or stocks of real estate companies, which provide the investor the benefit of investing in the real estate market without owning a physical property.
Through a collective investment approach, India real estate mutual funds provide access to a diversified portfolio of assets by leveraging the funds from different investors, thus minimizing risk and providing steady returns.
2. What Are The Benefits Of Investing In Indian Real Estate Mutual Funds?
Investing in real estate mutual funds gives you ample options to choose from, the most common being:
| Variety: | The funds have a wider scope and have the potential to invest in various geographically located real estate projects, hence reducing the chances of overall loss. |
| Easy Withdrawal: | While investment in real estate tend to be illiquid, these mutual funds can be redeemed easily at any time without much loss. |
| Minimum Investment Requirement: | Investing in real estate usually requires a huge sum of money, whereas real estate mutual funds can be availed with a much less amount of money. |
| Expert Oversight: | These funds are managed by experienced and specialized managers, making the scope of real estate investments much easier for investors who do not want to oversee their investments. |
3. The Best Performing Real Estate Mutual Funds In India
Having covered the essentials, let us examine the five most popular real estate mutual funds in India that investors consider due to their performance, diversification, and growth potential in the Indian real estate market.
- Nippon India REITs & Securitized Debt Fund
This is one of the best real estate mutual funds in India because it primarily invests in REITs and other real estate-related securities. The fund is known to invest in a variety of real estate assets, such like commercial properties, retail stores, and residential apartments. Since the fund has shown increasing returns consistently over the years, it is ideal for those seeking to capitalize on the rapidly expanding Indian real estate market. - HDFC Real Estate Fund
Another real estate mutual fund India that is known for well above average performance is the HDFC Real estate Fund. This fund invests in stocks of real estate development companies, infrastructure development companies as well as REITs. For investors who prefer a buy-and-hold strategy, this is one of the funds to consider for their portfolios as it endeavors to achieve appreciation in the value of their investments in real estate. - ICICI Prudential Real Estate Securities Fund
Investments are made in shares of Indian real estate companies and Indian REITs. This fund offers amplest opportunities for those looking to tap into the growth of the general real estate industry and more specifically into commercial and residential real estate. - Aditya Birla Sun Life REIT Fund
This fund offers capital appreciation through investments in a variety of REITs and real estate stocks. Regular income and capital gain seeking investors have favored this fund due to its hybrid nature which incorporates both debt and equity positions into real estate. - Kotak Real Estate Fund
Kotak Real Estate Fund invests in real estate stocks and REITs providing an indirect participation in the fast growing property market of India. It has situated itself through strong risk management and has systematically generated good returns for its investors over the years. This fund is ideal for those who have a medium to long term perspective on their investments.
4. Top Steps to Select the Right Real Estate Mutual Fund in India
To pick the best real estate mutual fund in India, consider your risk profile, financial goals, and timeframe. Here are a few to help your decision making:
| Performance History: | Evaluate the historical performance of the fund over 3-5 years to understand its returns and volatility. |
| Fund Manager’s Expertise: | An experienced fund manager in his/ her position with the proper knowledge of the real estate market could be the reason why the fund performs well even in tough conditions. |
| Expense Ratio: | A lower expense ratio is generally preferable, however in some cases, this can have a negative effect on your returns. Therefore, make sure to compare the expense ratios of different funds. |
| Risk and Diversification: | Investing funds into a diversity of real estate investment trust structures will not completely eliminate risk, however, it can mitigate it to a large degree. Generally, real estate is a very attractive sector to invest in but it also has market risks. |
| Investment Horizon: | Real estate mutual funds tend to perform better over the long term, so make sure to invest for at least 3-5 years. |
Final Thoughts
Now, if you’re keen on venturing into real estate but are not too keen on managing physical properties, consider investing in real estate mutual funds in India. These funds provide diversification with lower upfront investment as well as liquidity and professional management.
For example, the Nippon India REITs and Securitized Debt Fund, HDFC Real Estate Fund and ICICI Prudential Real Estate Securities Fund are some good funds to consider for those investors who wish to enjoy diversification in their portfolios through real estate investments. Monitoring risk tolerance and investment aims in real estate mutual funds is the same as any other fund.
In summary, real estate mutual funds allow investors the opportunity to regularly participate in the growth of the Indian real estate sector without having to invest a sizable amount of capital or effort into it. By doing proper research as well as prudently selecting the funds, one can enjoy balanced portfolio and achieve consistent returns.
