Real Estate Vs Mutual Fund: Which Is Better Investment Plan?

Real Estate Vs Mutual Fund: The performances of real estate and mutual fund are highly dependent on the economy of the country. Both belong to the growth asset category and involves risk. The demand for real estate is the popular investment options for many investors as the price has always gone sharply if we look back. And on the other side, mutual funds turn out to be the best investment vehicle for the people who do not know much about investing. What exactly mutual fund managers do-is they collect money from people, invest on their behalf and charge a small fee for managing investor’s money.

Risk, return, taxation policies, consistency, litigation, liquidity, ease of investing are the most important factors to check which investment policy is best suitable for your investment portfolio. It differs from different locations, state laws and economic conditions. As this is a controversial debate and therefore there is no straight forward answer to it. Only your investment objectives can define which one is better for you.

Ease of Investing

If we talk about real estate in terms of ease of investing- it involves a lot of paperwork and procedures which includes stamp duty, CERSAI charges, registration charge, etc. Appropriate time has to be given while investing in real estate. GST is an added burden with state-level RERA Acts and is costly in terms of maintenance, municipal charges, paying for infrastructure.

In other cases, investing in mutual funds is a matter of minutes. It’s an easy process as you can invest mutual funds online or visit branch offices and get your work done at once. And to keep it simpler, just invest in SIP in equity mutual funds, you will end up better off.

Risk And Returns

Mutual funds offer diversification with a minimum amount of investment and are backed by professionals. Even you can easily switch to one fund to another. But, in case of real estate diversification and switching is not possible as a large amount is invested in one single property. What good thing in real estate is you have direct control of your investments.

If the GDP grows at 8% you can expect equity mutual funds to grow at 15-17% and real estate to grow at 13-14% in the long run. If we look at the data below, large-cap diversified equity funds tend to give higher returns in the long term compared to real estate.

Real Estate Vs Mutual Fund

Real Estate Mutual Fund
City 10 years average real estate return Fund Name An average rate of return in 5 years
Delhi 6% SBI Bluechip Fund (Large Cap) 18.04%
Mumbai 12% Reliance Large Cap Fund 31.98% (CAGR)
Kolkata 6.5% DSP Blackrock Micro-cap Fund Reg Plan-Growth 17.86%
Pune 7.2% Aditya Birla Sun Life Advantage Fund (large cap) 22.38%
Bengaluru 7.3% Canara Robeco Emerging Equities Regular Growth 29.24% (CAGR)


Mutual funds investment has tax-saving benefits to the investors under Section 80C of the Income Tax Act. If you are investing in Equity Linked Saving Scheme (ELSS) you can avail tax exemption up to rupees 1.5 lakh. Whereas, in case of real estate, indexation helps in lowering taxes taking inflation into regard.

Recent Trends

Investors are now moving towards better alternatives. Mutual fund industry turns out to be a clear winner in this regard. From July 2018 to July 2019, assets managed by the Indian mutual fund industry underwent a growth of 7.72 per cent to stand at Rs 25.81 trillion, as per the AMFI data, more than half of which belonged to individual investors. Real estate has lost its former sheen due to demonetization.

AMFI’s ‘Mutual Fund Sahi Hai’ campaign have also boosted the mutual fund industry in terms of ease and access to investments. With this ample awareness, the focus has shifted.

Backed with digital channels, the big players in the market offering of investment options with amounts as low as Rs 100, to penetrate the B30 cities has helped bring mutual fund investing to the masses. Nearly 23% of the individual MF assets were registered from the B30 cities of India as of in July 2019.

The growth of digitization in the economy with increased expectations for faster and better products and services has made mutual funds popular among investors. This involves a rich digital experience that is both convenient and secure.

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