You have ₹1 crore and 20 years. One option leads to property, the other to mutual funds. Which road leaves you richer after every hidden cost—tax, upkeep, exit load—has been paid? Let’s run two clean, side‑by‑side simulations.
CASE 1 – ₹1 crore in Real Estate
(50 % Residential Flat + 50 % Grade‑A Commercial Office)
| Residential | Commercial | Combined | |
| Ticket Size (₹ lakh) | 50 | 50 | 100 |
| Stamp & Reg. (7 %) | 3.5 | 3.5 | 7 |
| Net Invested (₹ lakh) | 53.5 | 53.5 | 107 |
Capital Appreciation Assumption
• Residential: 8 % CAGR
• Commercial: 10 % CAGR
1. Capital Gain After 20 Years
| Gross Value (₹ lakh) | LTCG Tax (20 % w/ indexation*) | Net Value (₹ lakh) | |
| Residential | 233 | 18 | 215 |
| Commercial | 336 | 31 | 305 |
| Total | 569 | 49 | 520 |
*Indexation knocks effective tax down to ~8 % of gains.
2. Rental Stream (Re‑invested in 6 % liquid fund)
| Year‑1 Yield | CAGR of Rent | 20‑yr Pretax Rent Collected (₹ lakh) | Tax (30 % slab, post 30 % standard deduction on rent) | Net Rent Corpus (₹ lakh) | |
| Residential | 3 % | +5 %/yr | 46 | 10 | 36 |
| Commercial | 7 % | +4 %/yr | 110 | 26 | 84 |
| Total | — | — | 156 | 36 | 120 |
Adding the liquid‑fund growth on reinvested rent (6 % tax‑efficient*) lifts the after‑tax rent corpus to ₹210 lakh (Liquid‑fund gains are taxed at 20 % w/ indexation after 3 years).
Real‑Estate NET OUTPUT
- Profit after tax: ₹520 lakh
- Rent corpus after tax & reinvest: ₹210 lakh
- Grand Total: ₹7.3 crore
- Internal Rate of Return (IRR): ~10.6 %
- Liquidity: ≤ 9 months to exit + 2 % brokerage
Also read: Are Smart Homes Really Worth the Hype? Find Out Now!
CASE 2 – ₹1 crore in Mutual Funds
(Equal lumps into four equity schemes)
| Scheme (25 % each) | Category | TER | Exit Load* | Expected CAGR |
| Large‑Cap Index | Passive | 0.3 % | 0 | 11 % |
| Flexi‑Cap | Active | 1.0 % | 1 % (<1 yr) | 12 % |
| Mid‑Cap | Active | 1.1 % | 1 % (<1 yr) | 14 % |
| Small‑Cap | Active | 1.3 % | 1 % (<1 yr) | 16 % |
*We stay invested 20 yrs, so exit load = 0.
1. Gross vs Net Growth
| Category | Gross Final Value (₹ lakh) | TER Drag (₹ lakh) | Net NAV (₹ lakh) |
| LargeCap | 820 | 32 | 788 |
| Flexi‑Cap | 966 | 46 | 920 |
| Mid‑Cap | 1,338 | 61 | 1,277 |
| Small‑Cap | 1,675 | 75 | 1,600 |
| Total | 4,799 | 214 | 4,585 |
2. Capital‑Gains Tax Harvesting
We redeem ₹1 lakh of gains per fund per year (LTCG exemption). Over 20 yrs that shields ₹80 lakh of gains from tax. Remaining taxable gains incur 10 % LTCG.
| Metric | ₹ lakh |
| Tax‑free gains harvested(₹1 lakh × 4 funds × 20 yrs) | 80 |
| Taxable gains after harvesting | 3,505 |
| LTCG tax @ 10 % | 350 |
| Final corpus after tax(4,585 − 350) | 4,235 |
Mutual‑Fund NET OUTPUT
- Final Corpus: ₹4.2 crore
- Internal Rate of Return (IRR): ~15.1 %
- Liquidity: T+3 payout, negligible exit cost
HEAD‑TO‑HEAD SCOREBOARD (₹ crore)
| Metric | Real Estate | Mutual Funds |
| Net Corpus | 7.3 | 4.2 |
| IRR | 10.6 % | 15.1 % |
| Annual Hassle (maintenance, tenants, paperwork) | High | Low |
| Liquidity | Poor | Excellent |
| Diversification | Location risk | Sectoral spread |
Which Is “BETTER”?
- Pure Rupee Output – Real estate wins on absolute rupees because leverage‑like rental reinvestment plus price growth piles up.
- Efficiency & Flexibility – Mutual funds wins on IRR, liquidity, effort, and risk diversification.
- Risk of Single‑Point Failure – Vacancy, legal disputes, or one bad locality can maul the real‑estate outcome; an SIP‑friendly MF basket spreads risk over hundreds of companies.
- Tax Complexity – Property taxes are messy (multiple sections, indexation math, audit red flags). MF taxes are click‑and‑forget once a year.
Bottom‑Line
- Chasing maximum corpus and willing to babysit bricks? Opt for the property‑plus‑rent engine—but know you’re earning those extra crores with your time and illiquidity.
- Prefer hands‑free compounding and higher percentage returns? Mutual funds are objectively superior.
For most investors, blending both (say 30 % property, 70 % funds) balances rupee heft with agility. But if forced to pick one solely on financial merit net of every rupee of cost, the mutual‑fund route wins on rate of return, scalability, and sleep quality.
Written by Roshni Mohinani
