The entry of real estate funds in the already over-heated realty market is bound to cause quite a stir. A slew of real estate funds, promoted by Indian and foreign financial institutions, are scouring the real estate market for properties with assured returns to invest in. HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund (A group venture of Pantaloon Retail India Ltd) and India Advantage Fund (ICICI) are some of the prominent real estate funds in India.

With the entry of real estate mutual funds, builders will be hard-pressed to develop quality projects and leeway for sub-standard construction practices will be considerably reduced. Real estate funds are expected to acquire real estate assets with quality blue chip tenants and focus on growing markets witnessing substantial urban development.

DHFL Venture Capital Fund, promoted by Dewan Housing, has roped in banks, financial institutions, high net worth individuals and corporates as potential investors. The fund has focused on developing properties rather than invest in real estate. It has put more emphasis on secondary locations to add value.

HDFC India Real Estate Fund (HI-REF), the first scheme HDFC Property Fund, will invest in three broad categories of companies-projects: those in the planning stage, those in the development stage and those, which are complete. However HDFC is not keen on investing in shopping malls because it expects some shake-out in that space in the coming months.

On the contrary, Kshitij Venture Capital Fund, a group venture of Pantaloon Retail India Ltd., will be deploying funds exclusively in developing malls in tier II and III cities, primarily in western and southern India. The company is also launching a mall management service that will manage the upcoming plethora of malls as well as offer mall management services to other mall owners.