India's real estate stocks are too expensive following a sharp rally since March, making it difficult for real estate funds to close deals, despite having a pile of cash, a senior official at India's Kotak Realty Fund said on Tuesday.

The fund, a unit of Indian lender Kotak Mahindra Bank, believes home prices have bottomed but office and retail space will see more pain as supply outstrips demand, its Director Vikas Chimakurthy, said at a real estate Summit.

"We won't invest in a listed real estate company at these prices," said Chimakurthy, who was earlier an investment banker at Kotak Mahindra Capital, the former Indian partner of Goldman Sachs.

The fund, which has not invested a majority of the $700 million raised between 2005 and 2008, will instead focus on unlisted firms, he said.

"We believe that most of the listed real estate stocks are overpriced."

Investors could be in for rude jolt when real estate firms declare quarterly results, he said.