Real Estate Mutual Fund
Application Procedure for Registration
An application for registration of a mutual fund
shall be made to the SEBI in Form A by the sponsor.
A Draft for non-refundable application fee as
specified in the Second Schedule.
Eligibility
criteria
(i)
The sponsor
should have a sound track record and general reputation of fairness and
integrity in all his business transactions.
(ii)
Explanation:
For the purposes of this clause “sound track record” shall mean the sponsor
should —
a.
be carrying on
business in financial services for a period of not less than five years; and
b.
the net worth
is positive in all the immediately preceding five years; and
c.
the net worth
in the immediately preceding year is more than the capital contribution of the
sponsor in the asset management company; and
d.
the sponsor
has profits after providing for depreciation, interest and tax in three out of
the immediately preceding five years, including the fifth year;
(iii)
the applicant
is a fit and proper person
(iv)
in the case of
an existing mutual fund, such fund is in the form of a trust and the trust deed
has been approved by the Board;
(v)
the sponsor
has contributed or contributes at least 40% to the net worth of the asset
management company:
(vi)
Provided that
any person who holds 40% or more of the net worth of an asset management
company shall be deemed to be a sponsor and will be required to fulfill the
eligibility criteria specified in the regulations;
(vii)
the sponsor or
any of its directors or the principal officer to be employed by the mutual fund
should not have been guilty of fraud or has not been convicted of an offence
involving moral turpitude or has not been found guilty of any economic offence;
(viii)
appointment of
trustees to act as trustees for the mutual fund
(ix)
appointment of
asset management company to manage the mutual fund and operate the scheme of
such funds
(x)
Appointment of
custodian in order to keep custody of the securities or gold and gold related
instrument or other assets of the mutual fund held in terms of these
regulations, and provide such other custodial services as may be authorised by
the trustees.
Grant
of Certificate of Registration
The
Board may register the mutual fund and grant a certificate in Form B on the
applicant paying the registration fee as specified in Second Schedule.
Email: nbfc.consultant@ozg.co.in
Note: To visit at any Ozg Center, an appointment is required.
CONSTITUTION
AND MANAGEMENT OF MUTUAL FUND AND OPERATION OF TRUSTEES, ETC
Trust
deed to be registered under the Registration Act
A
mutual fund shall be constituted in the form of a trust and the instrument of
trust shall be in the form of a deed, duly registered under the provisions of
the Indian Trust Registration Act, 1908 (16 of 1908), executed by the sponsor
in favour of the trustees named in such an instrument.
Disqualification
from being appointed as trustees
(i)
No person
shall be eligible to be appointed as a trustee unless— (a) he is a person of
ability, integrity and standing; and
(ii)
has not been
found guilty of moral turpitude; and
(iii)
has not been
convicted of any economic offence or violation of any securities laws; and
(iv)
Have furnished
particulars as specified in Form C.
(v)
No asset
management company and no director (including independent director), officer or
employee of an asset management company shall be eligible to be appointed as a
trustee of any mutual fund
(vi)
No person who
is appointed as a trustee of a mutual fund shall be eligible to be appointed as
a trustee of any other mutual fund
(vii)
Two-thirds of
the trustees shall be independent persons and shall not be associated with the
sponsors or be associated with them in any manner whatsoever.
(viii)
In case a
company is appointed as a trustee then its directors can act as trustees of any
other trust provided that the object of the trust is not in conflict with the
object of the mutual fund.
Approval
of the Board for appointment of trustee
(i)
No trustee
shall initially or any time thereafter be appointed without prior approval of
the Board.
(ii)
The existing
trustees of any mutual fund may form a trustee company to act as a trustee with
the prior approval of the Board.
REAL
ESTATE MUTUAL FUND SCHEMES
Additional
eligibility criteria for Real Estate Mutual Fund Schemes
(i)
has been
carrying on business in real estate for a period of not less than five years;
(ii)
A real estate mutual
fund scheme of a mutual fund registered under sub regulation (1) shall not
invest in the securities mentioned in sub-clauses (ii) to (iii) of clause (a)
or in clause (b) of sub-regulation (2) of regulation 49E unless it has key
personnel having adequate professional experience in finance and financial
services related field.
(iii)
An existing
mutual fund may launch a real estate mutual fund scheme if it has an adequate
number of key personnel and directors having adequate experience in real
estate.
Other
conditions for real estate mutual fund schemes
a.
Every real
estate mutual fund scheme shall be close-ended and its units shall be listed on
a recognized stock exchange provided that the redemption of a real estate
mutual fund scheme may be done in a staggered manner.
b.
The units
issued by a real estate mutual fund scheme shall not confer any right on the
unit holders to use the real estate assets held by the scheme and any provision
to the contrary in the trust deed or in the terms of issue shall be void.
c.
The title
deeds pertaining to real estate assets held by a real estate mutual fund scheme
shall be kept in safe custody with the custodian of the mutual fund.
d.
A real estate
mutual fund scheme shall not undertake lending or housing finance activities.
e.
All financial
transactions of a real estate mutual fund scheme shall be routed through
banking channels and they shall not be cash or unaccounted transactions.
Email: nbfc.consultant@ozg.co.in
Permissible
investments
(ii)
Every real
state mutual fund scheme shall invest at least thirty five percent of the net
assets of the scheme directly in real estate assets.
(iii)
Every real
estate mutual fund scheme shall invest-
(a) At
least seventy five per cent. of the net assets of the scheme in-
(i)
Real estate
assets;
(ii)
Mortgage
backed securities (but not directly in mortgages);
(iii)
equity shares
or debentures of companies engaged in dealing in real estate assets or in
undertaking real estate development projects, whether listed on a recognized
stock exchange in India or not;
(b)
The balance in
other securities;
Ø
Unless
otherwise disclosed in the offer document, no mutual fund shall, under all its
real estate mutual fund schemes, invest more than thirty per cent. of its net
assets in a single city.
Ø
No mutual fund
shall, under all its real estate mutual fund schemes, invest more than fifteen
per cent of its net assets in the real estate assets of any single real estate
project.
Ø
Explanation:
For the purposes of this regulation, “single real estate project” means a
project by a builder in a single location within a city.
Ø
No mutual fund
shall, under all its real estate mutual fund schemes, invest more than twenty
five per cent. of the total issued capital of any unlisted company.
Ø
No mutual fund
shall invest more than fifteen per cent of the net assets of any of its real
estate mutual fund schemes in the equity shares or debentures of any unlisted
company.
Ø
No real estate
mutual fund scheme shall invest in –
- any unlisted security of the sponsor or its associate or group company;
- any listed security issued by way of preferential allotment by the sponsor or its associate or group company;
- any listed security of the sponsor or its associate or group company, in excess of twenty five per cent of the net assets of the scheme.
a.
No mutual fund
shall transfer real estate assets amongst its schemes.
b.
No mutual fund
shall invest in any real estate asset which was owned by the sponsor or the
asset management company or any of its associates during the period of last
five years or in which the sponsor or the asset management company or any of
its associates hold tenancy or lease rights.
Valuation
of real estates assets and declaration of net asset value
The
real estate assets held by a real estate mutual fund scheme shall be valued –
(a)
at cost price
on the date of acquisition; and
(b)
at fair price
on every ninetieth day from the day of its purchase in accordance with the
norms specified in Schedule IXB.
(c)
The asset
management company, its directors, the trustees and the real estate valuer
shall ensure that the valuation of assets held by a real estate mutual fund
scheme are done in good faith, in accordance with the norms specified in
Schedule IX B and that the accounts of the scheme are prepared in accordance
with accounting principles specified in Schedule XI.
(d)
The net asset
value of every real estate mutual fund scheme shall be calculated and declared
at the close of each business day on the basis of the most current valuation of
the real estate assets held by the scheme and accrued income thereon, if any.
Duties
of asset Management Company
a.
The asset
management company of a mutual fund having real estate mutual fund schemes
shall appoint suitable number of qualified key personnel with relevant
experience, before undertaking investment management of real estate assets of a
real estate mutual fund scheme.
b.
The asset
management company may appoint advisors to advise it on acquisitions or
proposed acquisitions of real estate assets.
c.
The asset
management company shall exercise due care while appointing real estate valuers
for valuing the real estate assets held by the real estate mutual fund scheme
and shall ensure that there is no conflict of interest.
d.
The asset
management company shall lay down an adequate system of internal controls and
risk management.
e.
The asset
management company shall put in place systems to ensure that all financial
transactions are done through banking channels and exclude transactions in cash
or unaccounted transactions.
f.
The asset
management company shall exercise due diligence in maintenance of the assets of
a real estate mutual fund scheme and shall ensure that there is no avoidable
deterioration in their value.
g.
The asset
management company shall ensure that the real estate assets held by a real
estate mutual fund scheme are adequately insured against impair, damage or
destruction.
h.
The asset
management company shall ensure that the cost of maintenance and insurance of
real estate assets is within reasonable limits and that no funds of the scheme
are utilized towards development of such assets.
i.
The asset
management company shall ensure that a real estate valuer
j.
The asset
management company shall ensure that no real estate valuer continues with
valuation of particular real estate asset for more than two years and that no
such valuer values the same asset for a period of at least three years
thereafter.
k.
The asset
management company shall record in writing, the details of its decision making
process in buying or selling real estate assets together with the
justifications for such decisions and forward the same periodically to trustees.
l.
The asset
management company shall ensure that investment of funds of the real estate
mutual fund scheme is not made contrary to provisions of the trust deed.
m.
The asset
management company shall obtain, wherever required under these regulations,
prior in-principle approval from the recognized stock exchange(s) where units
are proposed to be listed.
Usage
of real estate assets of a real estate mutual fund scheme
a.
The asset
management company may let out or lease out the real estate assets held by the
real estate mutual fund scheme if the term of such lease or letting does not
extend beyond the period of maturity of the scheme.
b.
Where real
estate assets are let out or leased out, the asset management company shall
diligently collect the rents or other income in a timely manner.
c.
Real estate
assets held by a real estate mutual fund scheme may be let out to the sponsor,
asset management company or any of their associates, at market price or
otherwise on commercial terms: Provided that not more than 25% of the total
rental income of the scheme shall be derived from assets so let out.
Disclosures
in offer document and other disclosures
49J.
(1) The offer documents of real estate mutual fund schemes shall contain
disclosures which are adequate for investors to make informed investment
decisions and such further disclosures as may be specified by the Board.
(2)
The portfolio disclosures and financial results in respect of a real estate
mutual fund scheme shall contain such further disclosures as are specified by
the Board.
(3)
Advertisements in respect of real estate mutual fund schemes shall conform to
such guidelines as may be specified by the Board.
Transactions by employees etc.
49K.
(1) All transactions done by the trustees or the employees or directors of the
asset management company or the trustee company in real estate assets shall be
disclosed by them to the compliance officer within one month of the
transaction.
(2)
The compliance officer shall make a report thereon from the view point of
possible conflict of interest and shall submit it to the trustees with his
recommendations, if any.
(3) The persons covered in sub-regulation
(1) may obtain the views of the trustees before entering into the transaction
in real estate assets, by making a suitable request to them.]
