Real Estate vs REITs: Stop Buying Flats for Rent
The Indian middle class is obsessed with buying a 'second flat' for rental income. It is mathematically the worst investment you can make. Discover how REITs allow you to own a piece of a Grade-A IT Park for just ₹400.
You have heard this advice from your Uncle: "Beta, land never depreciates. Buy a flat, put it on rent, and enjoy life."
Your Uncle is living in 1995. In 2026, buying a residential flat for investment is a Trap.
The Rental Yield in Indian cities (Mumbai, Bangalore, Delhi) is abysmal: 2% to 2.5%. Your Home Loan interest is 8.5%. You are losing money every month, hoping for "Capital Appreciation" that has stagnated for a decade.
Chapter 1: Enter the REIT
REIT (Real Estate Investment Trust) is a company that owns and operates income-generating real estate. Think of it as a "Mutual Fund for Buildings".
In India, we have major REITs like Embassy Office Parks, Mindspace, Brookfield, and Nexus Select. They own the massive IT Parks where Google, Microsoft, and Amazon have their offices.
The Difference
- Residential Real Estate: You rent to a family. They haggle, delay rent, and might refuse to vacate.
- REITs (Commercial): You rent to Fortune 500 companies. They sign 15-year leases with locked-in escalations (rent increases).
Chapter 2: The Brutal Math
Residential Flat vs REIT
| Metric | Buying a Flat | Buying REIT Units | Winner |
|---|---|---|---|
| Feature | Residential Flat (Physical) | REIT (commercial) | Winner |
| Ticket Size | ₹50 Lakhs+ | ₹300 - ₹400 (1 Unit) | REIT |
| Rental Yield | 2% - 2.5% | 6% - 7% (Dividend) | REIT (3x Higher) |
| Liquidity | Months (Hard to sell) | Instant (Trade on NSE/BSE) | REIT |
| Maintenance | Paint, Brokers, Tenants | Zero (Managed Pro) | REIT |
The Dividend Yield: REITs are mandated by law to distribute 90% of their Net Distributable Cash Flow (NDCF) to shareholders. Currently, Indian REITs offer a distribution yield of 6% to 7% annually. Plus, the share price appreciates over time.
Chapter 3: The Liquidity Nightmare
Imagine you have a medical emergency and need ₹10 Lakhs.
- Scenario A (Flat Owner): You cannot sell "one bedroom" of your ₹1 Crore flat. You have to sell the whole thing. Finding a buyer takes 3-6 months. You might have to sell at a discount (distress sale).
- Scenario B (REIT Owner): You open your Kite/Groww app. You sell 2,500 units of Embassy REIT. The money is in your bank in 2 days. You keep the rest invested.
Chapter 4: The Players
Embassy Office Parks
Asia's largest office REIT. Massive presence in Bangalore. Tenants: JP Morgan, Google.
Nexus Select Trust
India's first Retail REIT (Malls). Owns Select Citywalk (Delhi), Nexus Koramangala (Bangalore).
Mindspace Business Parks
Strong presence in Mumbai/Hyderabad. K Raheja Corp group.
Be a Landlord to Google, not Sharma Ji.
Stop being emotional about physical property. Real Estate is an asset class, not a trophy. REITs give you the benefits of Real Estate (inflation hedge, regular income) without the headaches (tenants, illiquidity).
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