Make money in real estate

The stock market may be chaotic, but one real estate fund has managed to keep the smile on investors' faces

It cannot be denied. The real estate industry is promising, to say the least. Over the past few years, a number of real estate companies were listed and foreign money poured into real estate funds. India's largest IPO - DLF in 2007 - was from this sector.

The listing of DLF even benefited existing players like Ansal Properties and Unitech which witnessed a sharp rise in their stock prices. A new index was developed to track the performance of the sector. And as the Sensex soared, the real estate sector too delivered impressively.

REAL ESTATE FUNDS

Returns

Scheme
1 Week
1 Month
3 Month

ICICI Pru Real Estate Sec Retail
1.19
2.91
-3.98

ING Global Real Estate Retail
1.99
8.25
8.80

BSE Realty
5.22
18.09
-20.75

BSE Sensex
1.46
9.36
-2.91

Returns as on 23rd April 2008

BSE Realty, the index for the real estate sector in India, witnessed a sharp rise, gaining nearly 84% in just a span of six months starting from July 2007. The index reached an all time high of 13,647 on January 14, 2008.

But when the Sensex crashed and lost nearly 20% between January 21, 2008 and April 22 2008), BSE Realty lost nearly 41%. Despite this, investors in the ING Global Real Estate Fund were far from sorry.

The fund came out with flying colours and stole the show. It outperformed the BSE Realty Index by a significant margin. The fund not only survived the jolt and took the crash in its stride, but delivered a return of 8% over the same time period.

If you had invested Rs 10,000 separately in the Sensex, BSE Realty and the ING Global Real Estate Fund on January 10, 2008, your investment would be worth Rs 7,900, Rs 5,500 and Rs 10,800 respectively (as on April 22, 2008).

The fund offered a return of around 11% for the one-month period ended April 22, 2008. Simultaneously, ICICI Pru Real Estate Fund delivered a negative return of 1% over the same period.

Of course, a blanket comparison is unfair since the latter is a domestically invested fund while ING Global Real Estate, a globally invested fund, is primarily a feeder fund to foreign equity fund ING Real Estate Securities.

Lesson to be learnt: Its not just asset diversification that matters. Geographical diversification too helps in enhancing the overall portfolio returns.

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