Pension Funds can Invest 5% of Corpus in Realty Trusts:Times Of India

Some of the NPS funds may now flow to regulated trusts

The pensions regulator has opened the doors of long-term retirement funds to the real estate sector, allowing the pension funds to invest up to 5% of their corpus in regulated real estate investment trusts.

A few thousand crores of the National Pension System (NPS) scheme could be invested in the funds-starved real estate sector after the Pension Fund Regulatory and Development Authority (PFRDA) issued the new investment rules earlier this week.

The NPS has a corpus of . 86,000 crore. The revised guide` lines will also apply to NPS Lite and Atal Pension Yojana. The government has allowed tax relief for investment up to `. 50,000 in the NPS in the budget for 201516, which will further raise investment corpus of the scheme that already receives steady inflow of retirement savings of government employees.

The room for new asset classes has been created by cutting down the allocation for the government securities from 55% to 50%. The new investment structure is expected to help increase returns of the scheme. The new guidelines will apply from June 10.

Under the new investment pattern noti fied by the PFRDA, pension funds can in vest up to 50% of their corpus in government securities and related instru ments. Up to 45% can be invested in debt and related instruments, including corporate debt and bonds of public financial institutions, up from up to 40% earlier. Up to 5% of the corpus can be invested in money market instruments, same as earlier. A maximum of 15% of corpus can be invested in equity and related instruments, the limit remaining the same as earlier.

The new category of investment notified includes assetbacked, trust structured and miscellaneous investments with a maximum allocation of 5%. The category includes commercial mortgage-based securities or residential mortgage-based securities.

It will also include Sebi-regulated real estate investment trusts. “Introduction of new asset class is a welcome move which is in line with recommendation of the Bajpai committee report released in April 2015. It would be interesting to see to what extent the PFRDA amends NPS investment guidelines for private sector,“ said Divya Baweja, partner, Deloitte Haskins & Sells LLP.

Incremental inflows into the scheme are to be invested as per this new investment pattern. Retirement funds have also been allowed to invest in the tier-1 bonds of the schedule commercial banks, opening another channel for banks to raise capital for expansion.