More than two years after the idea of real estate mutual funds (REMFs) was mooted in India, stock market regulator SEBI finally gave its blessing to fund houses looking to launch this product. Under the guidelines announced by SEBI, all existing mutual funds will be eligible to launch real estate schemes, but a corporate looking to launch such a product will have to show proof of five years experience in the real estate business. The guidelines also suggest that the assets of real estate schemes be valued every quarter by two valuers. However, net asset values (NAVs) may have to be declared on a daily basis, since these funds will be close-ended and listed on stock exchanges. With this move, true diversification has arrived in the country. Now, retail investors can invest in real estate as an asset class, which has a low correlation with equity and bonds, and enjoy the benefits of asset class diversification. Besides directly investing in real estate, SEBI has also permitted investments in mortgage-backed securities, securities of companies engaged in dealing in real estate assets or in undertaking real estate development projects and other securities. However, it has mandated that at least 35% of net assets of the scheme should be invested directly in real estate assets. Taken together, investments in real estate assets, real estate-related securities, including mortgage-backed securities, shall not be less than 75% of net assets of the scheme, SEBI said. SEBI has also said caps would be imposed on investments in a single city, single project and securities issued by a sponsor or associate companies. Each asset is to be valued by two valuers - accredited by a credit-rating agency - every 90 days from the date of purchase. Lowering of the two values shall be taken for the computation of NAV, enhancing investor returns. AMCs have also been banned from transferring real estate assets amongst its schemes or undertaking any lending or housing finance activities. SEBI also plans to bar investment in any real estate asset, which was owned (or held tenancy or lease rights) by the sponsor, or the asset management company, or any of its associates during the last five years.