Construction Investment Fund
Construction funds are financial institutions set out in Clause
(H) of Article (1) of Law of development of new financial tools and
institutions aiming to facilitate implementation of general policies of Article
(44) of Constitution, which are established in compliance with regulation
related to construction investment funds, approved on April 18, 2009 by the
Board of Securities and Exchange Organization. A construction fund is a
structured solution for participating financing construction of real estates,
and it authorization is issued by Securities and Exchange Org. and they are
operated under supervision of the said Organization. Construction funds are
deemed as project-based funds and such funds aim to make use of investment
opportunities in the capital market for helping the housing sector and also
making use of exiting investment opportunities in the housing sector for all
interested investors.
Activity Period of Construction Investment Funds
Activity period of a Fund begins as of the first working day after
receiving fund operation authority from Securities and Exchange Organization
and continues until its liquidation. Investors receive Registered Certificate
of Investment in return for investment in the Fund according to the approved
directive issued by the Organization. The liability of investors for the Fund’s
obligations is restricted solely to the basic price of each their investment
unit in the Fund. Ultimately, after completion of construction project, the
project is offered via bidding and is sold at the highest price and the
resultant earnings are distributed among the investors of the fund, including
the owner of the land and holder of construction license.
Privileges
Privileges of such Funds are as follows:
1)
Creation of a new method of financing in the
construction financing system (which was traditionally on the basis of
participating contracts, getting loan from banks and forward sales
2)
Supplying financial resources or the project
owner
3)
Provision of opportunity for creation of
official brand for the structure of the Fund
4)
Constructor or land owner’s certainty of
financing and availability of sufficient capital for launching and completion
of the project
5)
Direct enjoyment of investors of interests
resulting from the shared ownership of constructional projects and preservation
of investor’s purchasing power against increase in land and construction price
in the project area
6)
Reduction of probability of abuse of the fund’s
capital or engaging in an activity other than that set out in the Fund’s
articles of association and prospectus due to continuous supervision and verification
of activities by the auditor and trustee
7)
Convertibility of entire or a part of the units
of the Fund in to cash fund at any time
8)
Receiving the latest information relating to the
Fund and the Fund’s constructional project via website of the Fund
9)
Providing for opportunity of investment in great
and income-bearing projects for small investors
10) The
housing market being private and lack of existence of pricing standard in
contrast to the capital market transparency for financing and secondary trading
of securities
11) Highly
liquidity of the Fund’s units in comparison to direct investment in constructional
projects and convertibility of entire or a part of it into cash fund
12) Reduction
in overhead cost and making use of economies of scale
13) Reduction
in investment risk in investor’s assets portfolio due to existence of stable and
fairly low-risk assets