Here's the spreadsheet I built in front of a client last November. He'd sold some ESOPs, had about ₹1 crore sitting in a savings account, and wanted a second flat in Pune — partly for the rent, partly because “property always goes up.” His other option was parking the money in listed REITs, which a colleague had mentioned and he half-trusted. He asked me to settle it. So we ran both, line by line, with real numbers from a real listing he'd shortlisted in Baner.
I'll give you the conclusion upfront, because “it depends” is not advice: the flat lost, and it wasn't close. He didn't buy it. If you only read one section, read the yield maths below — it's the part every second-flat conversation skips.
What the flat actually costs
The shortlisted flat was a 2BHK in Baner at ₹92L. That's not what you pay, though. Stamp duty and registration in Pune added roughly ₹6.5L. Making it rentable — basic interiors, fans, geysers, a wardrobe — was another ₹4L by his own estimate. All-in, he was deploying about ₹1.02 crore to own an asset priced at ₹92L. That ₹10L gap is gone on day one, and it never shows up in anyone's “property doubled in ten years” story.
Comparable 2BHKs in that society rent for ₹26,000 a month — ₹3.12L a year, gross. Now subtract what landlords conveniently forget: society maintenance of ₹4,000 a month (₹48,000 a year, because tenants in that society don't pay it), property tax of about ₹18,000, one month's vacancy between tenants, a month's rent to the broker each time, and painting and repairs that average ₹25,000–30,000 a year over a tenancy cycle. Net rent: roughly ₹1.9L a year. On ₹1.02 crore deployed, that's a 1.85% yield. Rent is then taxed at his slab — even after the 30% standard deduction on rental income, he keeps about ₹1.5L. Post-tax yield: under 1.5%. A savings account beats it.
What the REIT pays
India's listed REITs — the large office ones — were distributing around 6% a year at the prices we checked. On the same ₹1.02 crore, that's over ₹6L annually, landing in his account quarterly without a single tenant call, and a meaningful slice of those distributions is treated as return of capital, so the post-tax gap versus the flat's rent is even wider than the headline 6%-vs-1.5% suggests. And if he needs ₹20L back next year, he sells units in one trading session. Try selling 20% of a flat.
The honest counterargument — and I made it to him myself — is appreciation. The flat is a leveraged, concentrated bet that one building in one micro-market of one city outruns everything else. Sometimes that bet pays spectacularly; Baner itself did between 2013 and 2020. But then say it plainly: you're not buying income, you're speculating on price, with a 1.5% coupon and six-figure exit costs while you wait. Almost nobody who says “rent plus appreciation” has done the maths on the rent half, because the rent half is embarrassing.
What he did
He put ₹35L into REITs and the rest into equity funds, and kept his existing home exactly as it was. Total time to deploy: two days. The flat he'd shortlisted is still listed, incidentally, four months later — which tells you something about the liquidity too. If you're weighing the same decision, this is exactly the working we do in a real estate advisory conversation — with your city's numbers, not Baner's.
One carve-out, so I'm not misread: if you'll live in it someday, or it's land in a place you know intimately, different conversation. But “a second flat for rental income” in a big Indian metro today is a 1.5% instrument with a 7% entry fee. I said that to him in November and I'll say it here.
This is a general account of a real, anonymised case for educational purposes and isn't a substitute for advice on your specific situation — prices, yields, and REIT distributions vary by market and over time.