Direct Real Estate vs Real Estate Mutual Funds & ETFs (2026)

A Complete NRI Guide (₹1 Crore Case Study Included)

For many NRIs, investing in India almost instinctively means buying property or land. It feels tangible, familiar, and emotionally reassuring.

At the same time, NRIs today also have access to:

• REITs (Real Estate Investment Trusts)

• Mutual funds and ETFs with heavy real estate or housing exposure

• Thematic equity funds linked to India’s housing and infrastructure growth

So the real question is no longer “Should I invest in real estate?”
It is how should an NRI take real estate exposure — directly or through financial instruments?

This article compares direct real estate ownership vs real estate exposure through mutual funds / ETFs, using a ₹1 crore case study, real fund examples, and an NRI-specific risk lens.

Two Ways NRIs Get Real Estate Exposure

Option 1: Direct Purchase of Real Estate or Land

• Residential apartments

• Commercial property

• Plots or land (with NRI restrictions)

Option 2: Indirect Real Estate Exposure

• REITs (office parks, malls, warehouses)

• Mutual funds / ETFs investing in:

  • Real estate developers

  • Housing finance companies

  • Construction, cement, infra & allied sectors

Both give “real estate exposure” — but the risk, liquidity, tax friction, and usability are fundamentally different.

The First Hidden Pain NRIs Face: Transferring ₹1 Crore at Once

Direct Real Estate Reality

Buying property almost always requires:

• A large lump-sum transfer (₹50L–₹1Cr+)

• Tight timelines linked to booking, registration, or possession

• Exposure to:

  • FX timing risk

  • Bank transfer delays

  • Compliance checks and remittance scrutiny

  • Stress if funds don’t arrive on time

For NRIs, this creates forced timing risk:

You must deploy capital when the property demands it — not when FX rates or liquidity are favourable.

Funds / ETFs Reality

With funds and ETFs:

• You can:

  • Transfer money gradually

  • Average FX over time

  • Invest via SIPs or staggered lumpsums

• No deal collapses if funds arrive late

• No one-shot execution pressure

📌 Flexibility in money movement is a real (and underrated) return enhancer for NRIs.

Real Fund Example: HDFC Housing Opportunities Fund Direct Growth

One commonly cited fund for “real estate-linked exposure” is HDFC Housing Opportunities Fund Direct Growth.

What This Fund Actually Is (Important Clarity)

• A thematic equity mutual fund

• Invests in companies benefiting from India’s housing ecosystem:

  • Banks, NBFCs, developers, cement, infra, construction

• It does not own property or earn rental income

• It behaves like equity, not physical real estate

Key Characteristics (High Level)

• Equity-heavy (≈97–98%)

• Very high risk (thematic)

• Equity-like volatility

• Long-term return profile linked to housing & infra growth

📌 This fund provides economic exposure to housing growth, not ownership or rental yield.

₹1 Crore Case Study: Like-for-Like Comparison (10 Years)

Assumptions (Conservative & Realistic)

• Investor: NRI

• Capital: ₹1 crore

• Horizon: 10 years

• Objective: Investment (not self-use)

• Returns shown are illustrative, not guaranteed

Scenario A: ₹1 Crore in Direct Real Estate

Capital Deployment

• Property purchase price: ₹1 crore

• Stamp duty & registration (~7%): ₹7 lakh

• Effective capital working: ₹93 lakh

Returns Breakdown

1. Rental Yield

• Gross yield: ~2.5% p.a.

• After vacancy, maintenance, taxes: ~1.8% net

• Net annual rental income ≈ ₹1.6–1.7 lakh

2. Capital Appreciation

• Conservative long-term appreciation: ~6% p.a.

10-Year Outcome

• Property value: ~₹1.67 crore

• Cumulative rental income: ~₹16–18 lakh

Total gross wealth created:
➡️ ~₹1.83–1.85 crore

⚠️ Mostly illiquid until sale.

NRI Frictions

• Forced lump-sum FX transfer

• Illiquidity (months to sell)

• Legal & title risk

• TDS & repatriation paperwork on exit

• High concentration in one asset, one city

Scenario B: ₹1 Crore via Real Estate–Linked Mutual Fund / ETF

(e.g. housing & real-estate-themed equity exposure)

Capital Deployment

• ₹1 crore invested gradually or lump sum

• 100% capital working from day one

• No stamp duty

• No deadline pressure

Returns Breakdown

• Long-term equity-linked return assumption: ~11–12% p.a.

10-Year Value @ 11.5% CAGR
➡️ ₹1 crore → ~₹2.97 crore

• Fully liquid throughout

• Partial exits possible anytime

• No operational burden

Risk & Suitability Matrix for NRIs

So… Is a Housing-Themed Mutual Fund “Better”?

Not universally.

Funds / ETFs work better when:

• You want scalable exposure

• Liquidity matters

• You’re unsure about long-term location

• You want to avoid operational hassle

Direct property works better when:

• Capital base is large

• Personal or legacy use exists

• Illiquidity is acceptable

📌 The mistake is treating ownership and exposure as the same thing.

The Pivot Money Perspective

At Pivot Money, we encourage NRIs to separate:

• Exposure vs ownership

• Flexibility vs final settlement

• Portfolio efficiency vs emotional comfort

For many NRIs, using funds and ETFs to build real estate exposure early, and adding direct property later, leads to better outcomes with far less stress.

Final Takeaway

A ₹1 crore real estate decision isn’t just about returns.

It’s about:

• How money moves

• How easily you can change course

• Whether your portfolio still works if life changes

For NRIs, liquidity and optionality are real returns.