MUMBAI: The Securities and Exchange Board of India (SEBI) on Monday approved the guidelines for real estate mutual funds (REMFs) and introduced changes in Venture Capital Fund lock-in period for initial public offerings (IPOs).

SEBI defines the Real Estate Mutual Fund Scheme as a scheme of a mutual fund which has investment objective to invest directly or indirectly in real estate property and will be governed by the provisions and guidelines under SEBI (Mutual Funds) regulations. The structure of the REMFs, initially, will be close ended.

The units of REMFs will be compulsorily listed on the stock exchanges and the Net Asset Value (NAV) of the scheme will be declared daily, SEBI stated in a press release, after its board meeting. The REMFs will appoint a custodian, who has been granted a certificate of registration to carry on the business of custodian of securities by the board. The custodian will "safe keep'' the title of real estate properties held by the REMFs.

These schemes can invest directly in real estate properties within India, mortgage (housing lease) backed securities, equity shares, bonds, debentures of listed and unlisted companies, which deal in properties and also undertake property development and in other securities.

The board also decided that the shareholding of venture capital funds (VCFs) and foreign venture capital investors (FCVIs) held in a company prior to making an IPO would be exempt from lock-in requirements only if the shares were held by them for a period of at least one year at the time of filing of the draft prospectus with SEBI.

This will help to ensure that only those VCFs and FCVIs, which participate in the company with a long term perspective, are allowed to get the benefit of the exemption from requirement of lock-in as intended by the SEBI (Disclosure and Investor Protection) Guidelines, SEBI added.

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