On 20 October 2026, a Reuters poll of 100 economists found that 94 expected the US Federal Reserve to leave rates unchanged at its meeting on 27 and 28 October, and all 100 expected another rise in December. The Fed had already lifted its target range to 3.75 to 4.00 per cent in September. For an Indian client with US property exposure, that news reaches the portfolio in two very different ways. The REITs vs private real estate question is therefore less about which route is better and more about what each route shows the client when rates move.
A REIT, or real estate investment trust, is a company that owns and usually operates income-producing property, and a publicly traded REIT is listed on a stock exchange. Its share price changes every trading day, so a rate rise appears on the client's statement within hours. A private US property interest is valued through periodic appraisals, so the same rate rise may take quarters to show up. Raveum's guide to GIFT City funds and other global investment routes sets both property routes beside three others, and the timing gap between them is what clients most need explained before they commit.
How REITs vs private real estate price the same buildings
Nareit, the trade body for US REITs, compared the two markets for the second quarter of 2026, using its own REIT Industry Tracker and appraisal data from the NCREIF ODCE index of large private property funds. It found that REIT share prices implied higher cap rates than private appraisals in all four main property types, which are apartments, industrial, office and shopping centres. A cap rate is a property's annual net operating income divided by its value, so a higher cap rate means a lower price for the same income. In plain terms, the stock market was valuing these buildings more cheaply than private appraisers were.
Edward Pierzak of Nareit described the gap in September as an "ostrich effect" in private valuations, arguing that appraisals have been slow to reflect higher borrowing costs. That is Nareit's interpretation, and Nareit represents listed REITs. Managers of private funds would answer that appraisals rest on actual transactions, while share prices also move with fear and sentiment that have little to do with buildings. A steady appraisal is not proof that a property has held its value, and a falling share price is not proof that the buildings are worth less.
What each route gives the client and what it asks in return
Listed REITs offer daily liquidity, small ticket sizes and a spread across many properties, often in many cities. The price of that liquidity is volatility, because REIT shares trade alongside every other stock and are sold off when the wider market falls. A client who needs cash during a downturn will sell at that day's market price, whatever the buildings are earning. Rate expectations add a second source of movement, since higher borrowing costs raise a REIT's interest bill and change what buyers will pay for property income.
Private US real estate offers an interest in one identified property, such as a net lease building, a self-storage facility or an apartment community. The deal is run by a sponsor, the firm that finds, buys and manages the property, and its plan is set out in the offering documents. The cost is illiquidity. The client should expect to stay invested for the full holding period, transfers before exit are usually restricted, and the outcome depends heavily on the sponsor. Raveum's guide to US commercial real estate for advisors explains how these deals are structured and what to ask a sponsor.
Both routes carry real risk, and a client can lose capital in either. Property values can fall, tenants can leave, distributions can be reduced or stopped, borrowed money magnifies losses when values drop, and the rupee value of a dollar holding moves with the exchange rate. A private deal adds the risk that the client cannot exit when they want to, along with concentration in a single property and sponsor. A REIT holding adds market swings that can be sharp even when the underlying buildings are stable.
Tax and paperwork differ more than clients expect
The remittance is treated the same way on both routes. Each is funded under the Liberalised Remittance Scheme, which allows a resident individual to send up to USD 250,000 per financial year, and each attracts TCS under Section 394 of the Income-tax Act, 2025. For example, a client who remits ₹40 lakh in tax year 2026-27 to buy US REIT shares, or to invest in a private US property, would face TCS of 20 per cent on the ₹30 lakh above the ₹10 lakh threshold, which is ₹6 lakh. The client can claim credit for that amount, but the cash stays tied up until the return is processed, as Raveum's guide to TCS on foreign remittance explains.
US tax on income differs in form. Under Article 10 of the India-US tax treaty, US tax on a REIT dividend paid to an individual resident in India is limited to 25 per cent of the gross amount, provided the individual holds less than 10 per cent of the REIT. In a private deal through Raveum, offshore investors, including Indian clients, invest through a US corporation known as a blocker, which holds the property interest. Payments the blocker makes to the client are reported on Form 1042-S, the US form that records income paid to a foreign investor and any US tax withheld. In both cases the client may claim credit in India for US tax withheld, on Form No. 44, which replaced Form 67 under the Income-tax Rules, 2026.
Both holdings belong in Schedule FA of the client's return for every year they are held, and both raise the US estate tax question. The IRS treats stock of corporations organised under US law as US-situated property, and the estate of a non-resident who is not a US citizen must file Form 706-NA if such assets exceed USD 60,000 at death. Shares of a US REIT and shares of a blocker corporation can both fall within that description. Raveum's earlier piece on tax on US stocks in India covers the sale-side rules that apply to listed shares bought through a broker.
What advisors should do before a client chooses
Start with the client's need for access to the money. A client who may need the funds before a private deal's holding period ends should not be in one, however sound the property looks. A client who would be unsettled by a sharp fall on a screen may find a listed REIT harder to hold than its liquidity suggests. Then check the paperwork the client is ready for, which means broker statements in one case and offering documents, sponsor reports and a Form 1042-S from the blocker in the other.
Next, confirm the remittance plan for the tax year, including TCS. Where family members will fund each other's remittances, raise the clubbing of income and gift tax questions. Ask the client's CA to confirm the foreign tax credit and Schedule FA position before money moves, and raise US estate planning for any client whose US holdings could cross USD 60,000. Raveum offers diversified US commercial real estate, including net lease, self-storage and multifamily, with each deal reviewed by Raveum and held in its own legal entity. Advisors who introduce eligible clients through Raveum's partner page keep their own judgement central, while Raveum handles KYC, agreements and US tax forms and the client's Indian tax position stays with the client and their CA.
The Fed's December decision will move REIT prices on the day it is announced, while private appraisals will take longer to respond. That gap is not a flaw in either route. It is the difference between a price set by the market every day and a value set by appraisal until the property is sold. Clients who understand that difference before they invest are better placed to hold either route through a difficult year, and the comparison of all five global routes in Raveum's guide to GIFT City mutual funds and other global routes is a sound place to begin that conversation.
Frequently asked questions
Can resident Indians invest in US REITs under the LRS?
Resident individuals can generally buy shares of US-listed REITs through an overseas broker under the Liberalised Remittance Scheme, within the limit of USD 250,000 per financial year. For tax year 2026-27 the remittance attracts TCS of 20 per cent on investment amounts above ₹10 lakh, and the holding must be reported in Schedule FA every year.
How are US REIT dividends taxed for an Indian resident?
Under Article 10 of the India-US tax treaty, US tax on a REIT dividend paid to an individual resident in India is limited to 25 per cent of the gross amount, if the individual holds under 10 per cent of the REIT. The dividend is also taxable in India, with credit for US tax claimed on Form No. 44.
Why do REIT prices fall when interest rates rise?
REIT shares trade every day, so their prices respond as soon as investors expect higher borrowing costs. Higher rates can raise a REIT's interest bill, make other income investments relatively more attractive and lead buyers to pay less for each dollar of property income. Prices can fall even when the buildings themselves are unchanged.
Why do private real estate values change more slowly than REIT prices?
Private property interests are valued by periodic appraisals, which rely on completed sales and take time to reflect new conditions. When few properties change hands, appraisals can stay close to earlier values for several quarters. A stable appraisal therefore does not prove that a property has held its value, and the real test comes at sale.
Is private real estate safer than REITs for a client?
Neither route is safer in every respect. Private real estate avoids daily price swings but is illiquid, concentrated in one property and dependent on the sponsor. Listed REITs can be sold on any trading day but can fall sharply with the stock market. Both can lose capital, so suitability depends on the client's horizon and cash needs.
Do US REIT shares count for US estate tax for an Indian investor?
Generally yes. The IRS treats stock of corporations organised under US law as US-situated property, and the estate of a non-resident who is not a US citizen must file Form 706-NA if such assets exceed USD 60,000 at death. India has no estate tax treaty with the US, so advisors should raise planning early.
This article is for general education and is not tax, legal or investment advice. Rules change and depend on individual circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.
