Rs 5 crore into a listed REIT at a 7.5% distribution yield, or into an office unit with 6% gross rent less 25% for costs and vacancy? Compare income, liquidity and concentration.

The REIT pays about Rs 37.5 lakh a year against about Rs 22.5 lakh net from the office, and is far more liquid and diversified. The office's 6% gross rent loses a quarter to costs and vacancy, leaving 4.5%; the REIT's 7.5% is already after its building costs. The office can be sold only over months, and its income rests on one tenant. It suits a family that wants control and can hold for a decade.

A flat let out at Rs 50,000 a month rarely puts Rs 6 lakh a year in the owner's pocket: there is society maintenance, property tax, repairs, and the month or two between tenants. Gross rent is the headline; the owner keeps what is left after costs and vacancy, here 75% of it. Rs 30 lakh of gross rent becomes Rs 22.5 lakh, a 4.5% net yield. If the Rs 5 crore also has to cover stamp duty and registration, say an illustrative 6% on top of the price, the unit costs about Rs 4.72 crore and the net income falls to about Rs 21.2 lakh.

The REIT's distribution already comes after its own building costs and vacancy, because a REITA real estate investment trust: a listed vehicle that owns income-producing property and pays most of its cash flow to unit holders. pays out cash it has actually collected. A higher yield on a listed unit also reflects that its price moves every day, so the family swaps valuation calm for liquidity and spread. The REIT's unit price can fall 20% in a bad year even while rents are stable, and the office unit's value can fall just as much; the office simply does not show it until it is sold.

One building with one tenant is one decision: if that tenant leaves and the unit takes 9 months to re-let, the family loses Rs 22.5 lakh of rent, most of a year's net income. The REIT spreads the same risk across many buildings and tenants, and can be sold in days; the office takes months to sell and cannot be sold in part. A family that needs Rs 50 lakh in a hurry can sell a tenth of its REIT units; it cannot sell a tenth of an office.

Close with who each route suits. For income, liquidity and spread the REIT is the stronger fit; the office unit makes sense only for a family that wants control of a specific asset, can hold ten years or more, and has liquidity elsewhere. The limit: REIT distributions can fall if its tenants leave, and its price can sit below the value of its buildings for long stretches.