India’s real estate sector has experienced tremendous growth over the past few decades, driven by urbanization, rising household incomes, and a growing middle class. This sector is central to the economy, encompassing four major sub-sectors: housing, retail, hospitality, and commercial.
The growth of e-commerce has further stimulated demand for real estate with increased requirements for warehousing and logistics facilities.
Through the channels of Alternative Investment Funds (AIFs) and others, investment in real estate has gained high momentum in 2024, and the sector thus remains attractive to investors.
Investing in mutual funds focused on real estate offers significant exposure to growing the segment for investors with the facility to not need to own direct properties in this stream.
These, as it happens, more often invest in equities of real estate development-oriented companies. Here are some of the best top five mutual funds invested in the real estate sector for 2025 in India.
Top 5 Mutual Funds for Real Estate Investment in 2025
1. Tata Housing Opportunities Fund
- Launch Date: September 2022
- Type: Thematic Fund
- AUM: Not specified
- Allocation: 40.35% large-cap, 21.39% mid-cap, 30.97% small-cap
- Key Holdings: Brigade Enterprises Ltd., TARC Ltd., Suraj Estate Developers Ltd.
The Tata Housing Opportunities Fund is an equity and equity-related instrument of entities that are expected to benefit from the growth in housing.
With a diversified portfolio that includes a significant allocation to small-cap stocks, this fund is well-positioned to take advantage of the growing housing market in India. Its holdings reflect a balanced approach towards established players and emerging companies within the sector.
2. HDFC Housing Opportunities Fund
- Launch Date: Not disclosed
- Type: Thematic Fund
- AUM: ₹993.28 crore
- Allocation: 60.05% large-cap, 7.67% mid-cap, 32.30% small-cap
- Key Holdings: Reliance Industries Ltd., DLF Ltd., KNR Constructions Ltd.
HDFC Housing Opportunities Fund is an equity investment scheme primarily targeting companies dealing in housing and allied activities.
The performance has been quite strong, and it has a substantial investment in large-cap stocks while having significant exposure to small-cap stocks that can be good growth vehicles with higher risk. The investment strategy includes the expansion of its footprint in the real estate sector through companies.
3. ICICI Prudential Real Estate Fund
- Launch Date: Not given
- Type: Market Cap Fund
- AUM: Not given
- Allocation: About 6.83% to real estate equities
- Key Holdings: RIL Ltd., Brigade Enterprises Ltd., DLF Ltd.
The ICICI Prudential Real Estate Fund has ensured investment exposure to real estate but diversified its portfolios between several sectors. Thus, a strategically allocated fund from ICICI Prudential takes its share of opportunities related to growth in the sector but balances risks from a portfolio of stable sectors.
4. ITI Large Cap Fund
- Not provided Large Cap Fund AUM Not provided
- Asset Allocation: Minor asset allocation to real estate equities
- Key Investments: Various large-cap firms
Although the ITI Large Cap Fund is mainly concentrated on large-cap equities, it has a small yet strategic allocation to real estate equities as part of its diversification strategy. Through this, investors can acquire little exposure to the real estate sector without being over-allocated to it.
5. Kotak Real Estate Fund
- Launch Date: N/A
- Type: Sectoral Fund
- AUM: Not disclosed
- Allocation: Heavily focused on commercial properties
- Key Holdings: Commercial real estate entities
The Kotak Real Estate Fund specialises in the type of investment concerning commercial property, thus an excellent fit for investors seeking to gain specifically within this particular category of real estate.
It concentrates on commercial assets and would, therefore, benefit well from the ever-growing demand in urban regions due to business expansion[4].
Why Invest in Real Estate Mutual Funds?
There are some advantages to investing in mutual funds that focus on real estate:
- Diversification: The funds usually invest in various companies and sub-sectors within real estate, thus reducing the risk of individual investment.
- Professional Management: Investors benefit from expert management of their portfolios, which can lead to better returns compared to individual investments.
- Liquidity: Mutual funds offer greater liquidity compared to direct property investments as they can be bought or sold easily on stock exchanges.
- Access to Commercial Real Estate: Direct access to invest in commercial properties is difficult for most investors; these funds are an entry into this lucrative business.
Market Prospect of Real Estate in India
The Indian real estate market is expected to grow at a CAGR of about 11% between 2020 and 2025[4]. The reasons for growth in this industry are:
- Urbanization Trends: The trend to migrate to urban centres drives demand for both residential and commercial properties.
- Government Initiatives: Policies, such as the Pradhan Mantri Awas Yojana (PMAY), are boosting affordable housing projects.
- E-commerce Growth: E-commerce growth leads to increased demand for logistics and warehousing spaces.
All these trends will have to be considered by investors when evaluating the mutual funds focused on real estate.
Conclusion
Investing in mutual funds targeting India’s real estate sector can be an effective strategy for capitalizing on the growth potential of this critical economic area.
The top five mutual funds highlighted—Tata Housing Opportunities Fund, HDFC Housing Opportunities Fund, ICICI Prudential Real Estate Fund, ITI Large Cap Fund, and Kotak Real Estate Fund—offer varied strategies catering to different investor needs and risk appetites.
As always, proper research and consideration of individual investment goals are essential before such decisions. Investors should remain vigilant of market conditions and economic indicators that may shape the performance of these funds as they enter 2025 and beyond.