REITs vs Physical Property: Where Should the Smart Money Go?

With three listed REITs now trading in India — Embassy Office, Mindspace Business and Brookfield India — the question for many investors is whether to hold real estate via REITs or directly.

The honest answer is that they serve different purposes, and a sophisticated portfolio uses both.

REITs give you liquidity, a yield of 6–8%, and exposure to Grade-A commercial office without the ticket size and illiquidity of a direct purchase. They're ideal for the income-allocation sleeve of a portfolio — money you want yielding while staying accessible.

Direct physical property gives you leverage (via subvention or loan structures), tax benefits on home loan interest, and the appreciation upside of a specific micro-market and project. The illiquidity is the trade-off, but it's also what creates the entry-pricing opportunity — you can't buy a pre-launch unit at wholesale via a REIT.

Our framework: use REITs for the liquid income sleeve (20–30% of real estate allocation), and direct property for the appreciation-and-leverage sleeve (70–80%). The two are complementary, not substitutes.

For investors who can't or don't want to hold physical property — whether due to NRI logistics, time horizon, or ticket size — REITs are a legitimate way to participate in Indian commercial real estate. But they won't replicate the 3–5x ROI-on-invested-capital that a well-timed subvention entry can deliver. That edge is unique to direct property.

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