"Property never loses" and "just buy an index fund" are both repeated with total confidence. Most comparisons behind them aren't fair: they set one asset's best decade against the other's average year, leave out rent or costs, or ignore the loan. Here's how to compare the two properly, and what happens when you do.
Start with comparable alternatives
This comparison only makes sense for a property you'd buy as an investment, one you won't live in. Then the question is clean: should the same money go into a rental flat or a fund?
If it's your own home, the comparison changes. You'd otherwise pay rent, and a renter can invest what they'd have spent buying. That's the rent vs buy question, with its own maths.
What the headline numbers measure
Returns depend heavily on the period you pick. The official Nifty 50 factsheet shows the index's total return, including dividends, as −7.09% over the year to 30 September 2026, 6.38% a year over five years, and 12.12% a year since 1995.
House prices measured by the National Housing Bank's index rose 5.0% across 50 cities over the year to December 2025. That measures prices only: it leaves out rent, which a landlord earns, and stamp duty and maintenance, which a landlord pays.
Those figures cover different periods and different things. Putting them side by side doesn't tell you which is the better investment, which is why we built a like-for-like comparison instead.
A fair comparison: the same money, 10 years
The worked example, as an illustration:
- Property: a ₹1 crore flat plus 7% stamp duty and registration, ₹1.07 crore in all. It earns 3.5% gross rent, close to the median across five cities in the Gulmohar Atlas, with one month empty each year and 0.6% of its value a year in maintenance and property tax. Rent rises 5% a year and is reinvested in a fund. It's sold after 10 years with 2% selling costs.
- Fund: the same ₹1.07 crore invested on day one.
- Taxes are left out of both sides. They depend on your income, holding period and tax regime.
Illustration (model property-vs-fund@1): ₹1 crore flat plus 7% stamp duty, or the same ₹1.07 crore in a fund. Flat earns 3.5% gross rent (one month vacant a year, 0.6% of value in owner costs), reinvested in the fund at 10%; 2% selling costs; rent grows 5% a year. Taxes excluded on both sides. Illustration — inputs are stated in the text.
In this illustration the flat beats the fund only in one corner: prices growing 7% a year against a fund returning 8%, ₹2.39 crore against ₹2.31 crore. With prices at 5%, or a fund at 10% or more, the fund ends ahead. More vacancy and higher costs (three empty months and 1% of value a year) cut the flat's result from ₹2.12 crore to ₹1.92 crore at 5% growth.
Does a loan help?
Borrowing to buy is often sold as property's secret weapon: you control a larger asset with less of your own money. In this illustration, with a 75% home loan at 9% over 20 years, the owner pays the EMI from income, and the fund investor puts the same amount into the fund each month:
| After 10 years (illustration) | Fund at 8% | Fund at 10% | Fund at 12% |
|---|---|---|---|
| Flat with loan, prices +5% | ₹1.54 cr vs ₹1.91 cr | ₹1.59 cr vs ₹2.18 cr | ₹1.64 cr vs ₹2.49 cr |
| Flat with loan, prices +7% | ₹1.86 cr vs ₹1.91 cr | ₹1.91 cr vs ₹2.18 cr | ₹1.96 cr vs ₹2.49 cr |
The fund comes out ahead in every case. A loan boosts your result only when the property earns more than the loan costs. In this illustration, with rents around 3% of prices, the flat's price would have to grow faster than about 7% a year, for years, before borrowing at 9% pays off. When it doesn't, the loan magnifies the shortfall.
Risk and liquidity
Returns aren't the only difference:
- Concentration. One flat is one building in one location. A fund holds many companies.
- Liquidity. You can sell fund units within days. Selling a flat can take months, and needs a buyer at your price.
- Lumpiness. You can invest in a fund a little at a time. Property needs a large sum up front.
- What a fund doesn't give you. Somewhere to live, a sense of security, control over the asset. For many families those matter more than a return comparison, and that's a legitimate choice.
Deciding by purpose
- Buying to live in? Compare it with renting, not with a fund. See rent vs buy.
- Buying purely to invest? Ask what price growth you need for the flat to beat a fund, and whether you'd bet on that for a decade.
- Borrowing to invest in property? Check that the rent plus the price growth you expect clearly beat the loan rate. If not, the loan works against you.
If you're weighing a specific investment property, a Gulmohar evaluation checks its price against the local market and whether the purchase fits your finances.
Common questions
How do I compare property returns with mutual funds fairly?
Start both with the same amount of money and the same monthly commitment, over the same period. On the property side, count rent after vacancy and costs, stamp duty when you buy, selling costs when you sell, and any loan you still owe. On the fund side, invest the same amounts. Comparing a city's best decade of price growth with an index's return over a different period doesn't tell you much.
Should rental income be included in property returns?
Yes. Price indices measure the change in prices only, so they understate what a landlord earns. But rental income in Indian cities is modest: in the Gulmohar Atlas, median gross rental yields range from about 2.7% to 3.8% across five cities, before vacancy, maintenance and tax.
Does leverage always improve an investment outcome?
No. A loan boosts your return only if the property earns more than the loan costs. In our worked example, with a 9% home loan, a flat whose price grows 7% a year with about 3% rent did worse with a 75% loan than without one, compared with putting the same money into a fund.
Sources
- Nifty 50 index factsheet — NSE Indices, 30 September 2026
- NHB RESIDEX press release: housing prices, Q3 FY 2025-26 (Oct–Dec 2025) — National Housing Bank, March 2026
- Gulmohar Atlas: gross rental yields across five cities — Gulmohar, October 2026
Figures labelled “illustration” are worked examples with the inputs stated in the article, not market data. Spotted an error? Write to hello@gulmohar.ai and we will correct it.