One of the most important advantages of investing in different financial markets is the protection of individuals’ capital against inflationary changes in the country and the world, which in addition to the investors’ profit from the investment in question; It causes that the main and initial capital of individuals is protected from the risks of inflation and its value is kept stable. Investment can be done by the person directly, or indirectly and through an intermediary, each of these methods has its own advantages. Most of the people who do not have enough knowledge and skills to analyze the financial markets or the time necessary to acquire skills or make transactions, but who wish to invest and earn profit from these markets, have the possibility to invest indirectly and benefit from its good returns. become Meanwhile, investment funds are one of the important indirect investment tools. For more information, we suggest you read the macroeconomics education article.
What is an investment fund?
Investment fund is one of the suitable tools for indirect investment in financial markets and earning profit from these markets. These funds, using expert and expert analytical teams, provide the possibility for all people to invest in a specialized and principled way and benefit indirectly by having any level of knowledge of financial markets.
In addition to the expert analysis teams that create the necessary attraction for the general public to invest in these funds, the yield of investment funds is another attraction. The yield of these funds is usually higher than the yield of banks, and this causes people to receive more interest than bank interest by investing in these funds, which will be very encouraging.
Another attraction of investment funds is the possibility of investing in them with small capital. We know that entering some financial markets and investing in them with the aim of making a profit requires large sums of money that are beyond the means of many people and causes them to lose the possibility of investing in that market, but investment funds made it possible to The general public can invest in different markets with small capital.
According to their activity license, the funds are concentrated and operate in different areas and form their investment portfolio from stocks, bonds, etc. In the meantime, some investment funds operate in a specific field or market, such as real estate investment funds, gold investment funds, land and building investment funds, etc., in this article we intend to learn about land and building investment funds.
◊ Also read this article: Types of investment funds in Iran
Investing in land and building may seem simple and profitable at first glance, but the truth is that this market, like other financial markets, requires information, knowledge, sufficient skills and a lot of experience, which usually, the public People do not specialize in it. Therefore, most of the time, many people who are afraid of the risks and difficulties of this market and investing in it, limit it and invest in other areas.
Land and building investment funds have been established with the aim of serving the general public and benefiting ordinary people from the land and building market so that more people can find the possibility to invest with little capital, without having the required knowledge and tolerating the hassles of investment and transactions. Invest in this financial market and earn profit. Land and construction investment funds are one of the different types of investment funds that operate in the field of land and construction. These funds collect small capitals from investors and invest in construction projects (office, commercial and residential) under the laws established in the country’s stock exchange organization and by receiving the necessary permits. By investing in construction projects and earning profit from the sold units of the project, these funds divide the profit among the investors of the fund.
It should be noted that land and building investment funds have the possibility to invest in any construction project, but they are not allowed to invest in service and production projects.
History of land and building investment funds in Iran
The idea of land and building investment funds was designed and proposed at the end of 2006, when fixed income investment funds were the only investment funds in the Iranian stock market. With this idea, the first prospectus and statutes of land and building investment funds were prepared and compiled in early 2008. After preparing and drafting the memorandum and articles of association of these funds, most of the funds that were intended to be established, due to the capital market’s lack of familiarity with the important processes and factors of the land and construction industry and the lack of familiarity of the land and construction field with new financial instruments, were They did not reach the stage of establishment and underwriting, but with the passage of time and the familiarity of the land and construction industry activists and capital market investors, the activity of these funds flourished and the field was provided for those interested in this field.
What are the pillars of land and building investment funds?
The activities of the land and building fund, the administration of the fund and the supervision of these activities are carried out by the members of the investment funds. It is necessary that these elements are approved by the Iran Securities and Exchange Organization and perform their activities and duties under its supervision and rules. The pillars of land and building investment funds and the duties of each of them are:
1. Assembly of Land and Building Investment Fund:
Investors who own more than one percent of the total investment units of the land and building fund, on behalf of other investors of the fund, form an assembly to perform tasks such as determining the fund’s components, making changes in the fund’s components, approving the pre-sale auction documents of the units and Be in charge of deciding whether or not to liquidate the fund. Of course, it should be noted that some of these decisions are subject to the approval of the country’s stock exchange organization.
2. Manager of Land and Building Investment Fund:
This pillar is a legal person who is chosen from among financial institutions such as investment funds, capital supply companies and investment consulting companies to manage projects and financial affairs.
3. Land and building investment fund auditor:
The auditor of investment funds is selected from among the trusted auditors of the Stock Exchange and Securities Organization to be responsible for auditing the financial statements of the fund.
4. The trustee (inspector) of the land and building investment fund:
The custodian or inspector of the fund is chosen from among the trusted auditors of the country’s stock exchange organization, legal institutions or investment consulting companies to supervise the fund’s activities and profit making process on behalf of the investors and small owners of the fund.
5. Land and building investment fund underwriters:
This pillar is formed by capital supply companies, financial institutions or banks that received the necessary permission from the central bank, in order to finance the project in the event that the small investors of the fund do not provide the necessary capital to advance the project.
6. Land and building investment fund market director:
Each of the brokerages, banks, investment consulting companies and capital supply companies can assume the role of market management and adjust the supply and demand in the capital market using continuous buying and selling, control market fluctuations and improve liquidity. help
7. Construction Manager of Land and Building Investment Fund:
This pillar is selected from among the contracting companies that have the necessary documents and licenses in the field of construction and facilities and have at least 5 years of useful work experience in the field of construction of large construction projects to undertake construction and contracting operations. These companies are rated companies that can be changed with the approval of the fund assembly and the approval of the stock exchange organization.
8. Land and building investment fund supervisor:
This pillar is a legal person who, according to the rules of the engineering system organization, will control the construction process of the structure to ensure the correct implementation of the projects. It is possible that the supervisor of the fund can be changed with the approval of the stock exchange organization and the approval of the investment fund assembly.
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Statutes and prospectus of land and building investment funds
Land and building investment funds, like other investment funds, have a statute and a prospectus that includes all the details of the fund, the salary of the fund members and the calculation of investment units. The statutes of the funds are regulated by the Securities and Exchange Organization and are unchangeable, but the prospectus is prepared and regulated by the fund trustees based on the laws of the country’s Securities and Exchange Organization to familiarize investors with the goals, strategies and information of the fund’s projects.
How do land and building investment funds work?
These funds collect small capitals and provide the necessary capital for construction projects (office, commercial and residential). After selling the prepared units of the project and earning profit by the fund, this profit will be divided among the investors of the fund and according to the ownership of each investor. Therefore, the investors of land and building funds should wait until the end of the project and the sale of its units and be with the fund in order to receive the profit of their investment.
In other words, the activity process of land and building investment funds is carried out in four main stages:
- Collecting small capital from investors
- Allocating these funds to construction projects and project financing
- Selling building units (commercial, office and residential) built in the project and earning profit
- Divide the profit from the project among the investors of the fund
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Land and building investment fund units
In order to make it possible for every investor to become the owner of a part of the fund’s assets and the amount of each person’s assets from the total assets of the fund can be separated, determined and traded, the total assets of the fund are divided into smaller parts called units, which are used by investors. Can be bought and sold. Each investor will become the owner of a part of the fund’s assets by paying the amount for a certain number of fund units and will receive an investment certificate. This certificate shows the number of units owned by the investor. Therefore, each person can buy or sell any number of investment fund units to other investors. On the other hand, if the investor needs cash, it is possible to sell a number of units under his ownership and keep the remaining units.
Land and building investment funds are tradable funds, and the process of buying and selling their investment units will be done online and through the trading systems of the stock exchange.
The value of each fund investment unit at the time of subscription is equal to its nominal value, and this value will change and increase with the passage of time and the activity of the fund in the desired area. For this reason, every 3 months, the net value of each investment unit of the fund is determined by separating its cost price, and also every 6 months, its daily value will be determined and published to be available to investors.
How are land and building investment funds reported?
The management of the land and building investment fund is obliged to publish information such as the total price, project information, the percentage of physical progress of the project, the conditions and pre-sale status of the units in the form of a report and inform the investors. These reports are prepared and published in the form of monthly, quarterly, six-monthly reports and interim reports at the time of capital increase.
In the monthly reports, a status report called the status report of the physical progress of the project will be prepared by the construction manager based on the standard form of the status of physical progress and will be published on the website of the investment fund.
In the quarterly reports, the net value of the fund’s investment units is calculated based on the cost price and will be published on the investment fund’s website.
Six months report:
In the six-month reports, the official judicial expert will calculate the net value of the investment units of the fund based on the cost price and the daily value.
Interim report at the time of capital increase:
During the capital increase phase, the net value of the fund’s investment units will be calculated based on the cost price and daily value and will be published on the fund’s website.
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Net asset value of land and building investment fund ( NAV )
The net value of an investment fund’s assets will be obtained by subtracting the value of the fund’s liabilities from its values.
The calculation of this value will be done by an official judicial expert every 6 months. The expert examines the projects of the fund and evaluates and calculates the value of each project according to the percentage of progress of the project and its daily price, and this evaluation becomes the basis for calculating the net value of the fund’s assets. This calculation will be done in specific time frames and its results will be published and informed to the investors so that they can be informed about the progress percentage of the fund’s projects and their profitability.
What are the benefits of land and building investment funds?
These funds have advantages and benefits for both investors and investors, among which the following can be mentioned:
- Creating an opportunity for investors to invest in the land and building market with small capital and earn profit.
- Preserving the value of investors’ capital in hyperinflation and increasing astronomical prices in the land and building market.
- High liquidity of investment units of land and building funds, by making it possible to buy and sell investment units of the fund in the over-the-counter market.
- Reduction of investment risks due to the requirement of the existence of the trusted auditors of the Securities and Exchange Organization and the trustee of the fund, who supervise the activities and the correctness of the executive operations of the investment fund and create a safe platform for investors.
- Attracting stagnant funds and increasing financial circulation in the country’s economic cycle, which will help economic prosperity.
- High transparency of land and building investment funds, due to the need to publish financial reports at the prescribed times and monitor the fund’s assets over time.
- The gradual creation of savings for people who do not have large funds.
- Investors benefit from tax exemptions, as an incentive for investment.
- Providing the required capital in the field of construction and the advancement of construction projects.
- Making it possible to complete half-finished projects by accepting new investors in the form of a land and building investment fund.
- Separation of project management from its financing process.
- Benefiting the owners of investment units of land and building funds from the profit from the sale of building units of each project.
What are the risks of investing in land and building funds?
Investing in land and building funds is not suitable for people who have a low risk tolerance, are looking for a guaranteed profit and do not have the necessary patience to accompany the fund, because land and building investment funds do not have a guaranteed profit and invest their investors in profit or They share the losses of the fund. Therefore, it is possible that at some point of time, the fund will suffer losses and its investors will suffer losses.
In general, the risks of investing in land and building funds are:
- The risk of possible decrease in the value of investment fund assets
- Risk of possible increase in construction project construction costs
- The risk of not completing the construction project on time
- The risk of a decrease in the price of fund investment units in the market
◊ Also read this article: What is a mixed fund? (Advantages and Disadvantages)
How to buy and sell investment units of land and building funds?
Land and building investment fund units are offered in the stock market and can be traded. Therefore, in order to invest in these funds and buy its units, by preparing the stock exchange code and referring to one of the brokerages, search for the name of the desired symbol, and then by ordering and paying the price of each unit, which is determined on a daily basis, the fund units to We buy the desired number. The sale of investment units is also done online in the same way.
Frequently asked questions
What is land and building investment fund?
These funds were established with the aim of serving the common people to make it possible for the general public to invest in the land and building market and earn profit from it.
How do land and building investment funds work?
Land and building investment funds, by collecting the small capitals of the general investors and allocating these funds to large administrative, residential or commercial projects, participate in the construction of these projects and divide the profit from the sale of project units among the investors.
What are the investment units of land and building funds?
The total assets of land and building investment funds are divided into small parts called units so that the amount of each investor’s assets from the total assets of the fund can be recognized and traded.
How to buy and sell land and building investment fund units?
Buying and selling investment units of land and building funds are done online and through brokers. Therefore, to buy and sell the units of these funds, we need to get the stock exchange code and choose a brokerage. Then, by searching for the name of the desired fund symbol and completing the ordering process, we can purchase the desired number of units of the desired fund. We also sell investment units of land and building funds online in the same way.
What are the pillars of land and building investment funds?
Land and building investment funds, like other investment funds, have elements that are responsible for managing the fund, carrying out its activities and monitoring the activities. These elements are:
- fund assembly
- fund manager
- Fund auditor
- Trustee (inspector) of the fund
- Obliged to subscribe to the fund
- Fund marketer
- Fund building manager
- Fund supervisor
Investing in land and building funds is suitable for which people?
Investing in land and building funds will not be suitable for risk-averse people who are looking for a certain and secure profit because these funds do not have a guaranteed profit and investors share in the profit or loss of the fund, and it is possible that when the fund suffers, Investors also suffer losses.
What are the benefits and risks of investing in land and building funds?
Investing in land and building funds will have many benefits for investors and investors of the fund, which are discussed in detail in the article.
But the risks of investing in these funds are:
- Possible decrease in the value of fund assets
- A possible increase in construction project costs
- Failure to complete the construction project on time
- Reducing the price of fund investment units in the country’s stock market
Land and building investment funds are one of the types of investment funds that made it possible for the general public to profit from the land and real estate market with little capital and without the necessary knowledge in this field. These funds are managed by the members of the fund who are responsible for its management and monitoring the activities of the fund. Land and building funds, by collecting small capitals and allocating them to construction projects, after selling the commercial, administrative and residential units built in the project, distribute the profit earned by the fund among its investors and to the extent of each person’s ownership of the total assets of the fund. they divide Investors with a stock exchange code can buy and sell investment units of land and building funds through brokerages and online and earn profit by doing transactions in this market.