Real estate vs equity: how property and shares compare in India

Real estate and equity ask different things of you. Neither is better for everyone.

What is the difference between investing in real estate and in equity?

Real estate is a flat, plot or shop that you own; equity is a share, a small slice of a company, held directly or through a fund. An equity mutual fund is a pool of money from many people that a manager invests mostly in shares.

A REIT (real estate investment trust) is a middle route: you hold units of a trust that owns property, and listed units trade on the stock exchange. Two articles cover it: how a REIT works in India and how a REIT compares with buying property.

How much money do you need to start?

An equity fund can start small: you can start a SIP or one-time investment from ₹100 in the Koshex app. A SIP is a fixed amount invested at regular intervals.

A flat needs far more. If you borrow to buy, the bank lends only part of the price. The loan-to-value ratio is the share of the price the bank may lend. Banks follow the RBI's loan-to-value ceilings for housing loans. As of July 2026, the ceiling is 90% for a loan up to ₹30 lakh, 80% for a loan above ₹30 lakh and up to ₹75 lakh, and 75% above ₹75 lakh.

So the smallest down payment a bank needs is 10% on a loan up to ₹30 lakh, 20% on ₹30–75 lakh and 25% above ₹75 lakh. It is worked out on the price before stamp duty and registration, which you pay on top.

Stamp duty and registration charges are set by each state and differ from state to state; check your state's registration department for the current rate.

Buying shares directly takes a demat account, which holds your shares in electronic form, and a trading account with a stockbroker.

How do you earn from each: rent and price, or dividends and price?

Both pay you in two ways: income while you hold, and a gain or loss when you sell. The income from a property is rent. The income from shares is a dividend, which is cash a company pays out of its profits.

Rent from letting a house is taxed only under "income from house property". From the rent you take away the municipal tax you paid, then a flat 30%, then any home-loan interest.

A dividend is "income from other sources". It is taxed at your slab rate, the rate for your income band. A company deducts 10% TDS, tax taken before the money reaches you, once a resident individual's dividends from that company exceed ₹10,000 in the tax year.

A fund can also pay out money, called IDCW, which lowers the fund's NAV, the price of one unit, by the amount paid.

Why income and gains are not the same walks through the gap.

Which one is riskier?

They carry different risks. Share prices can fall sharply within months, while a property ties most of your money to one building in one place.

That second point is called concentration: a large share of your money riding on one thing. An equity fund invests in the shares of many companies. To see how far share prices have dropped in past crises, read how markets behave in a crisis.

Borrowing adds another layer. Buying with borrowed money makes the gain and the loss on your own money larger. Take a ₹45,00,000 flat bought with ₹9,00,000 of your own money and a ₹36,00,000 loan. That is an 80% loan, inside the ₹30–75 lakh band above.

Say the price rises 10% to ₹49,50,000. Your share, the price minus the loan, goes from ₹9,00,000 to ₹13,50,000. That is up 50%.

Say the price falls 10% to ₹40,50,000. Your share drops to ₹4,50,000, which is down 50%. Interest, costs and tax come on top of both results, and this is an illustration, not a forecast.

How quickly can you get your money out?

Fund units can be sold in part, and the money must reach you within 3 working days. A property is sold whole, after you find a buyer. This speed of turning an asset into cash is called liquidity.

Take Rohit, 29, in Visakhapatnam. A family emergency needs ₹2,60,000. With equity fund units, he can sell just that amount. One fund house's scheme document, for instance, lets investors ask for redemption by an amount or by a number of units.

The price he gets is that day's NAV. That may be below what he paid.

With a flat, he cannot sell a bedroom to cover it. He sells the whole flat or he borrows.

What does each cost you?

Equity costs are small and visible. Property costs are large at the start and keep coming.

On shares, the securities transaction tax (STT) is charged on trades on the exchange. NSE's table lists 0.1% on the purchase and on the sale of an equity share held for delivery. A sale of a unit of an equity oriented fund on a recognised exchange carries 0.001%. You also pay your stockbroker's brokerage. Inside a fund, you pay the expense ratio, the fund's yearly fee shown as a percentage of your money and taken out of the fund's value. What the expense ratio means explains it.

On property, the big charges come first: stamp duty and registration. A buyer also deducts 1% TDS from the price when it is ₹50 lakh or more. After that come maintenance and property tax for as long as you own it. Stamp duty, registration and other charges when buying a house lists them, and whether a house is really an investment covers the running costs of a home.

How are property and equity gains taxed?

A long-term gain on listed shares or equity-oriented funds, held over 12 months with STT paid, is taxed at 12.5% on the amount above ₹1,25,000 a year. Each person gets one allowance. A long-term gain on property bought on or after 23 July 2024, held over 24 months, is taxed at 12.5% on the whole gain, with no ₹1,25,000 allowance.

A capital gain is the profit when you sell for more than you paid. Short-term and long-term refer to how long you held the asset. The table is for a resident individual in tax year 2026-27 under the Income-tax Act, 2025. 4% cess is added on top of the tax at these rates.

An equity oriented fund is one that invests at least 65% in equity shares of domestic companies listed on a recognised stock exchange, on an annual average. International funds may not qualify.

If you are resident in India and sell a house or land you bought before 23 July 2024, you pay the lower of two tax calculations, one of which allows for inflation. For property bought on or after that date, the long-term rate is a flat 12.5%.

Property has its own relief. Section 82 of the Income-tax Act, 2025 (the old Section 54) lets you avoid tax on the gain from selling a house if you buy another house within one year before or two years after the sale, or build one within three years. Section 86 (the old 54F) does the same for gains on other long-term assets, in proportion to what you reinvest. Section 85 (the old Section 54EC) covers gains on land or buildings put into NHAI or REC bonds within six months, up to ₹50 lakh, locked in for five years.

A home loan has its own tax rules under the old regime; home loan tax benefits sets them out.

Trades inside a mutual fund create no tax for you, because a SEBI-registered fund's own income is exempt. You are taxed when you sell your units. For a worked rupee figure, see the REIT against property comparison.

What should you weigh up before choosing?

It depends on your goal, how soon you may need the money, how much you have, and whether you want to own and manage a property. These questions decide it for one person:

• Your timeline. If the money may be needed in a few years, how quickly each asset sells matters more.
• The size of the sum. A flat takes a large amount in one go; a fund can be built up in small instalments.
• Your appetite for swings. Shares can fall sharply in months; one building concentrates a property's risk.

A distributor such as Koshex helps you choose a fund that suits your goal and timeline. You can browse equity funds, see all mutual funds, or try the SIP calculator. Mutual funds or stocks compares funds with direct shares, and what gold does in a portfolio covers gold.