The real cost of bricks and mortar: Rethinking real estate investment and personal net worth in India

Owning property still signals success in India. Parents nudge, brokers persuade, and colleagues boast about “appreciation.” Yet, when the dust settles, property’s math often looks different from the dream. Between stamp duty, brokerage, repair costs, and years of EMIs, the real return can shrink quickly. Meanwhile, reits—listed trusts that own income-producing properties—offer a way to access commercial real estate without blocking large capital. This piece takes a clear-eyed look at property’s true costs and compares them with options such as reits and reit investing, so an investor’s net worth isn’t quietly drained by avoidable leaks.

Emotional Decision or Financial Trap

For many households, a first purchase begins with emotion: security, status, or a desire to “lock money” in something tangible. Behavioral biases—FOMO, home-bias, anchoring to a neighborhood—rush decisions. The trap appears later: a stretched down payment, rising maintenance, and a long EMI tail. If the flat remains vacant for months or the tenant negotiates hard, expected cash flows wobble. A wise real estate investment separates life needs (primary residence) from return expectations (an investment property). When the driver is emotion, not numbers, an investor might mistake a lifestyle choice for a money-making asset.

Real Estate Works for HNIs, Not for Salaried Classes

• HNIs can diversify across cities, developers, and property types; a salaried household usually concentrates 50–70% of net worth in one unit.
  
• HNIs negotiate better entry prices and carry vacancies without panic; a single-unit landlord cannot.
  
• HNIs allocate to reits for yield and liquidity, and to direct property for opportunistic upside; a salaried person may rely solely on leverage.
  
• HNIs manage risk with advisors and structured debt; a retail buyer faces rate resets and prepayment penalties alone.
  Net result: real property’s economics often favor deep pockets, while reit investing provides a more even playing field for smaller portfolios.

The Return Myth: What Are You Really Earning?

Most “8–10% rent + big appreciation” claims ignore frictional costs. Consider a typical example for context:

This table excludes loan interest. With an 8–9% home-loan rate, leveraged IRR can trail fixed-income options. By contrast, reits disclose yields, occupancy, and debt, distribute income regularly, and can be bought or sold in minutes.

Rental Yield: The Silent Red Flag

In many Indian metros, rental yields hover near 2–3% on market value, even before upkeep. When loan rates sit materially higher, carry turns negative—EMIs exceed rent. The “appreciation will fix it” story assumes perfect timing and uninterrupted cycles. If prices stagnate for a few years while costs rise, returns compress further. Transparent instruments like reits publish portfolio-wide yields and pass-throughs, helping investors see the true income picture instead of relying on optimistic assumptions.

Debt Trap in Disguise

EMIs front-load interest. For several early years, equity barely builds while interest dominates cash outflow. Add intermittent repairs, whitewashing between tenants, and broker fees for every churn. If income dips or a job move forces a quick sale, illiquidity bites: distress discounts, delayed transactions, or tax complications. A single, large, illiquid bet can weigh on flexibility—especially for salaried families targeting education goals, emergencies, or entrepreneurship. Spreading risk through bonds, deposits, and reit investing can keep cash flows predictable and assets liquid.

When Real Estate Does Make Sense

There are sensible cases:

• A primary residence that matches life stage, commute, and budget, held for stability rather than returns.
  
• Deep-value or distress opportunities with clean titles and strong location moats where the buyer can hold long term without leverage strain.
  
• A diversified HNI portfolio where direct property is capped and balanced by liquid assets, including reits and high-quality debt.
  
• Professional management: grade-A developers, transparent RERA compliance, and realistic rent/occupancy assumptions.
  Even then, keeping a separate investment lens—comparing post-tax yields and risk—prevents over-allocation to one asset.

Conclusion: Real Estate is a Luxury, Not a Shortcut to Wealth

Property can deliver pride and comfort, but it is seldom a magic escalator for wealth. The math rewards those who buy for use, not speculation; who budget for every frictional cost; and who refuse to overload leverage. For steady income and flexibility, reits and reit investing often provide cleaner exposure to the underlying asset class, plus liquidity and disclosure standards that single flats cannot match. Treat real property as a considered allocation, not a default. A balanced plan—mixing bonds, equity, and reits—can grow net worth with fewer sleepless nights. For anyone still determined to buy, the best real estate investment is the one whose numbers add up even on a rainy day.

FAQs

Can I invest 10,000 rs in real estate?

Direct property—no. But reits trade like shares, so small tickets are possible. That is why many retail investors begin with reit investing before considering a full unit purchase.

What is the return of real estate in India last 20 years?

 Results vary sharply by city and micro-market. Once stamp duty, maintenance, and vacancy are included, long-term returns often mirror conservative asset classes. Transparent reits help reveal true income and growth rather than headline prices.

Is it worth investing in real estate in India?

 It depends on purpose and math. For a home to live in, yes—if EMIs fit safely. As a pure investment, compare net yield and liquidity with bonds and reits; sometimes market instruments win.

What is the average return of REITs in India?

Returns change with rent growth, occupancies, interest rates, and unit prices. Investors evaluate distribution yield plus potential capital movement. For newcomers, start small, study disclosures, and follow real estate investment tips like diversifying across assets and avoiding excessive leverage.

Disclaimer : Investments in debt securities/ municipal debt securities/ securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully.