At such high price levels for property, the buyer is taking his time which does not augur well for the developers. It is precisely for this reason that the uncertainty has stepped in.

HDFC’s Karnad admits that there are some pockets in India where prices need to correct further. “However, today, the real estate sector is going through a stage of over-pessimism,” she argues.

The story of the aspiring Indian middle class is hard to ignore and that could be urge to own a home could still make sure there is a healthy level of demand. Overall, the impact of a global slowdown on India is slowly being felt. It may affect Indian realty sector in coming time. However, NRIs affections towards Indian properties will not likely to be vanish in near future.

The market for loan securitization was Rs 31,000 crore, of which real estate loan securitization accounted for 20% of the total market as on March 2008. Both ICICI bank and the State Bank of India refused to comment.

It is allowed to a bank or a NBFC to sell the loan as a securitized paper. Mutual funds are the major buyers of these papers, return on which is linked to the rating of the loan. Following the securitization, loan disappears from the balance sheet of the banks or NBFCs, who in turn communicate to the borrowers that their loan has been sold to an investor.

From borrower’s point of view, it could mean lesser disclosure. Borrowers then keep repaying to the Special Purpose Vehicle (SPV) where such paper is parked instead of the bank or NBFC. Banks make good the spreads between lending at a certain tenor to selling the loan for a higher yield. Rajiv Shastri, Lotus MF said, “We have been very wary about these loans from the very beginning, primarily because they didn’t offer high asset cover-age. Most papers floating in the market offered one-and-a-half times asset coverage, which is nothing if prices start falling. Last November-December, we just took two papers, which offered us a coverage of 3-4 times”.

Debt funds from the houses of Reliance, DWS and HSBC have been fairly aggressive in buying real estate loans. Reliance MF CEO Vikrant Gugnani said, “We are more cautious in today’s conditions like anyone else. We have always been conservative in our investment policy and we remain so”.

BNP Paribas Chief Investment Officer (CIO) Mr. Ram Kumar said, “If it is a loan taken by a big realty company, the rating will be higher and there are more buyers for such papers. But we treat these investments like any other paper, although they are illiquid. We do not invest in them anymore. We did, two years go”. Many other fund managers too have changed their stance now.

For over two years now, the RBI has raised the risk weight for commercial real estate loans to 150% in addition to issuing guidelines on multiple occasions to banks to limit their exposures to the sector. Nevertheless, real estate loans form only a small part of most banks’ balance sheets, thus allowing them to continue financing real estate assets.

Emaar MGF was enforced to withdraw its seven thousand crore rupees offering, due to poor market response. Poor market response has also enforced DLF, Unitech and Indiabulls to suspend the Singapore listing of their real estate investment trusts. Though the flow of funds into the real estate sector has not stopped, developers are not ready to go in for equity dilution at the parent company level fearing lower valuations. This has encouraged most companies to look for private equity funding at project or SPV level.

It may be some time before fund houses queue up to offer REMFs with the same enthusiasm that they now display for equity funds. Though SEBI’s recent notification clarifies negative side in REMF regulations relating to valuation and disclosures, getting such products off the ground may prove to be quite a challenging exercise for the existing fund houses.

Investors confused about which equity fund to go for, usually benefit if they go by the pedigree of the fund house launching the scheme. For equity funds, factors such as the investment team’s experience and track record in managing Indian stocks are key to a new fund’s performance. But the opposite may be true for REMFs.

Companies active in the real estate space, rather than those used to managing equity or bond investments may be better placed to get REMFs quickly off the ground in the Indian context. That SEBI has stipulated a five year track record for realty players seeking to launch REMFs is a positive, as only seasoned players will then enter the fray. Real estate, as an asset class, is not familiar ground to India’s mutual fund companies, given that their current asset base is dominated by debt, equity or combination products. This being the case, their entire investment team and security selection process has been built around selecting the best stocks and bonds for their fund portfolios.

The developer, which has received investments by JPMorgan Chase & Co. and Deutsche Bank AG in the past two years, said that funds sponsored by mortgage lender Housing Development Finance Corp. agreed to invest $54 million in the projects being developed by the group.

Mr. Lodha said, “We are in an aggressive growth and need funds. We could consider an IPO in the next 24 months.”

Property developers in the world’s fastest growing major economy after China are seeking more investments to meet rising demand in an economy that’s grown an average 8.7 % since 2003, lifting the incomes of individuals and companies. Salaries in India may rise an average 15 % this year, the sixth successive annual increase of more than 10 %.

The real estate company plans to expand in Mumbai, Pune and Hyderabad. Three-fourths of the projects are for houses and the remaining for shops and offices. The company plans to deliver 27 million square feet of space over the next three years.

The company is also developing some premium properties in Mumbai, among them Lodha Solitaire, where a 7,200-square-feet apartment is priced at 510 million rupees ($12.8 million).

Funds sponsored by HDFC, and registered in Mauritius, will buy a 45 percent stake in Mumbai-based Lodha’s special purpose vehicles for its projects in the southern city of Hyderabad, the company said. Special purpose vehicles are companies set up for investment purposes.

Deutsche Bank led a group of private equity firms to invest $425 million in Lodha projects in September and JPMorgan Chase & Co. invested $60 million in the group’s projects in December 2006.

In 2006 China got 14.6 % votes while India had 18 % and was ranked in the 2nd position. One of the important findings that cannot be unnoticed is the jump in investor’s confidence in China.

AFIRE Chief Executive J A Fetgatter told that this is the 2nd time in 3 years, China has been chosen as the country offering the 2nd best chance for capital appreciation after the US. Interestingly, the United States, whose economy continues to be bogged down by the subprime crisis and faces the danger of a recession, still managed to preserve the top position in the ranking list.Among those surveyed, 26.2 % said America offered the greatest prospect for capital appreciation in the real estate sector as compared to 23 % recorded in 2006.