NEW DELHI, Oct. 29 -- Kotak Mahindra Mutual Fund has launched the Kotak Nifty Realty Index Fund, an open-ended index scheme aimed at providing investors with exposure to India's listed real estate sector. The New Fund Offer (NFO), which opened on October 26, will remain available for subscription until November 9, 2026.

The scheme seeks to replicate the performance of the Nifty Realty Index (Total Return Index), subject to tracking errors, by investing in securities comprising the underlying index in proportion to their respective weights. The minimum application amount during the NFO is Rs 1,000, with investments permitted in any amount thereafter.

Real estate sector poised for expansion

India's real estate sector is expected to benefit from rising household incomes, increasing urbanisation, changing family structures and growing demand for residential and commercial properties.

The Indian real estate market is projected to reach USD 1 trillion by 2030, compared with an estimated USD 650 billion in 2025, supported by residential demand, commercial expansion, infrastructure spending and urbanisation.

Household savings patterns have also indicated a growing preference for physical assets. The share of physical savings increased from 60 per cent in 2019-20 to 71 per cent in 2022-23, reflecting the importance of physical assets in household wealth creation.

Residential demand has been supported by improving inventory conditions across India's seven major property markets, while changing lifestyle preferences have contributed to increased demand for premium housing.

Urbanisation and the growing prevalence of nuclear families are also expected to expand housing requirements. By 2027, nuclear families are projected to account for 66 per cent of Indian households, while the country's urban population is expected to increase from 522.4 million in 2025 to 675.5 million by 2035.

Listed developers could gain market share

India's real estate sector remains highly fragmented, with the five largest developers accounting for approximately 22 per cent of the market, leaving nearly 78 per cent outside their combined share.

Organised and listed developers could benefit from changing customer preferences, stronger balance sheets, improved lending confidence and favourable demand-supply conditions.

Demand for commercial real estate is also being supported by the expansion of Global Capability Centres (GCCs), banking and financial services, technology companies and professional services firms.

The increasing preference for Grade A office campuses and business parks, along with government infrastructure expenditure, is expected to strengthen the commercial property market.

Other segments, including retail spaces, hospitality and Special Economic Zones, are also witnessing opportunities linked to consumer spending, tourism and infrastructure development.

Index performance and portfolio composition

The Nifty Realty Index delivered compounded annual growth rates of 14.14 per cent over three years, 10.91 per cent over five years and 15.84 per cent over ten years as of September 30, 2026.

Over the same periods, the Nifty 500 Total Return Index recorded annualised returns of 9.50 per cent, 9.04 per cent and 12.76 per cent, respectively.

However, the Nifty Realty Index registered a negative return of 1.88 per cent over the preceding year and declined 6.74 per cent over one month, reflecting the volatility associated with the sector.

The index comprises major listed real estate companies, including DLF, Phoenix Mills, Lodha Developers, Prestige Estates Projects, Godrej Properties, Oberoi Realty, Brigade Enterprises, Anant Raj, Aditya Birla Real Estate and Sobha.

As of September 30, DLF held the highest index weight at 20.38 per cent, followed by Phoenix Mills at 17.05 per cent, Lodha Developers at 15.90 per cent, Prestige Estates Projects at 11.79 per cent and Godrej Properties at 10.38 per cent.

The index's market-capitalisation composition included 20.4 per cent large-cap stocks, 64.9 per cent mid-cap stocks and 14.7 per cent small-cap stocks.

Passive investment approach

The Kotak Nifty Realty Index Fund will follow a passive, rule-based investment strategy, with allocations corresponding to the weights of securities in the underlying index.

The portfolio will be aligned with periodic changes in the Nifty Realty Index, which is reviewed semi-annually. The scheme will not levy entry or exit loads.

The fund will be managed by Satish Dondapati, Jeetu Valechha Sonar and Abhishek Bisen.

The scheme is designed for investors seeking long-term capital growth and returns corresponding to the performance of the Nifty Realty Index, subject to tracking errors.

Risk classification and investor suitability

The fund has been classified under the very high-risk category, reflecting its exposure to the real estate sector and associated market fluctuations. Kotak Mahindra Mutual Fund has clarified that historical index performance does not indicate the future performance of the scheme and that there is no guarantee or assurance that its investment objective will be achieved.

Investors have been advised to consult their financial advisers if they are uncertain about the scheme's suitability and to review the relevant scheme documents before making investment decisions.

Published by HT Digital Content Services with permission from Millennium Post.