Definition
REIT vs Physical Property
This compares investing in a Real Estate Investment Trust (REIT) — a listed vehicle owning income-producing real estate — against buying physical property directly.
A REIT lets you invest small amounts in a professionally managed portfolio of commercial properties, trades on the stock exchange for liquidity, distributes most of its rental income to unit-holders, and spreads risk across many assets. Physical property, by contrast, needs a large lump sum, is illiquid and effort-intensive to manage, but gives full control, the chance of leverage via a home loan, and emotional/utility value.
Tax and cash-flow profiles differ: REIT distributions and capital gains follow their own rules, while physical property carries stamp duty, maintenance, and the capital gains and exemption regime of Section 54. For diversification and liquidity, REITs win; for control, leverage and a tangible asset, physical property appeals — many investors hold some of each.
Related terms
- Real Estate Capital GainsReal estate capital gains are the profits you make when you sell a property for more than its cost, and they are taxable in India as short-term or long-term gains.
- Fractional Ownership (Real Estate)Fractional ownership lets multiple investors pool money to jointly own a share of a high-value property — typically commercial real estate — that none could easily afford alone.
- Rental YieldRental yield is the annual rent a property earns expressed as a percentage of its value, measuring how much income the asset generates relative to its price.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.